Big-Time Insider Sells That You Should Monitor Closely

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

When an insider sells his or her stock it sometimes is part of a preplanned strategy, or to avoid higher taxes, but then sometimes it is more and a sign of what’s to come. These insiders have knowledge of fundamentals, demand, supply, and all other business related catalysts prior to it becoming public knowledge. Therefore, we should continue to monitor trends, and in this article I am looking at four significant insider sells over the last month.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p># of insider sales</p> </td> <td> <p># of shares sold</p> </td> <td> <p>One-month performance</p> </td> </tr> <tr> <td> <p>Visa</p> </td> <td> <p><span class="ticker" data-id="210557">(NYSE: <a href="http://caps.fool.com/Ticker/V.aspx">V</a>)</span></p> </td> <td> <p>4</p> </td> <td> <p>28,686</p> </td> <td> <p>3.15%</p> </td> </tr> <tr> <td> <p>Salesforce</p> </td> <td> <p><span class="ticker" data-id="203207">(NYSE: <a href="http://caps.fool.com/Ticker/CRM.aspx">CRM</a>)</span></p> </td> <td> <p>11</p> </td> <td> <p>151,824</p> </td> <td> <p>5.84%</p> </td> </tr> <tr> <td> <p>Generac</p> </td> <td> <p><span class="ticker" data-id="223768">(NYSE: <a href="http://caps.fool.com/Ticker/GNRC.aspx">GNRC</a>)</span></p> </td> <td> <p>4</p> </td> <td> <p>121,739</p> </td> <td> <p>(13.76%)</p> </td> </tr> <tr> <td> <p>Trimble</p> </td> <td> <p><span class="ticker" data-id="205802">(NASDAQ: <a href="http://caps.fool.com/Ticker/TRMB.aspx">TRMB</a>)</span></p> </td> <td> <p>8</p> </td> <td> <p>421,928</p> </td> <td> <p>4.53%</p> </td> </tr> </tbody> </table>

 

  • Visa is a company with large insider and institutional ownership. Therefore, the number of shares sold has not weighed heavily on the stock. It continues to sit at all-time highs as one of the better performing stocks of the post-recession era. However, now that insiders are selling stock, investors might want to assess future growth and their own positions.
  • Salesforce announced a very strong quarter and then afterwards we saw significant insider selling. However, insiders had begun to sell prior to its quarterly report, and then picked up in volume after the post-earnings bounce. This action might mean nothing, but it could be a sign of things to come.
  • In November, Generac fell from all-time highs, which was in part due to insider selling. The company has rallied for the better part of five years, but is now seeing some strong selling pressure. At first glance the company looks undervalued with large institutional presence, therefore this selling pressure might be nothing more than a healthy pullback. But it’s still worth noting and investigating further.
  • Besides Salesforce, Trimble’s insider selling was the most significant. Yet for some reason the stock has climbed higher, and continues to create new 52-week highs. With a P/E ratio of near 40 the stock might have significant room to fall. As an investor, I would monitor the company’s key developments closely, and watch for any catalysts that could slow the growth of this momentum company.

Back in early 2011 there were a lot of investors who defended insiders at Travelzoo (NASDAQ: TZOO) as they aggressively sold shares. The company had traded with market leading gains and executives could be seen on various television programs defending the valuation of their company. Meanwhile, the company’s largest holder, Ralph Bartel, was selling shares as quickly as possible, and we have since seen an epic decline in the process.

In regards to Travelzoo and insider selling, investors should’ve used the information to make an investment decision. When an insider unloads stock at an alarming rate then it could very well mean that the executive is trying to cash out before the bottom falls out. I am not saying that any of the insiders mentioned above are taking part in this activity, but that the reasons for selling must be considered.

Right now we are living in strange times as insiders and large holding investors are forced to make tough decisions ahead of the fiscal cliff. We have seen an overwhelming number of companies elect to pay special dividends, some companies have moved up the dates of future dividends, and all are trying to determine the best way to play the fiscal cliff. Therefore, these facts must be considered when assessing the activity of insiders. It might mean nothing, but then again, it might mean everything, and it’s up to you to determine the way to use the information.


BrianNichols has no positions in the stocks mentioned above. The Motley Fool owns shares of Salesforce.com and Travelzoo. Motley Fool newsletter services recommend Salesforce.com, Travelzoo, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus