In the last year, many International Business Machines Corporation (NYSE:IBM) insiders sold a substantial stake in the company which may have sparked shareholders’ attention. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.
While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.
See our latest analysis for International Business Machines
In the last twelve months, the biggest single sale by an insider was when the insider, Michelle Browdy, sold US$1.8m worth of shares at a price of US$185 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$222. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. This single sale was just 7.6% of Michelle Browdy’s stake.
In total, International Business Machines insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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There was substantially more insider selling, than buying, of International Business Machines shares over the last three months. In total, Senior VP & Chief Human Resources Officer Nickle LaMoreaux sold US$775k worth of shares in that time. On the other hand we note insider Alfred Zollar bought US$197k worth of shares , as previously mentioned . Since the selling really does outweigh the buying, we’d say that these transactions may suggest that some insiders feel the shares are not cheap.
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. International Business Machines insiders own 0.1% of the company, currently worth about US$193m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
Unfortunately, there has been more insider selling of International Business Machines stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing International Business Machines. To assist with this, we’ve discovered 3 warning signs that you should run your eye over to get a better picture of International Business Machines.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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