It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Costco Wholesale Corporation (NASDAQ:COST).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
Check out our latest analysis for Costco Wholesale
Costco Wholesale Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Executive VP, Joseph Portera, for US$4.2m worth of shares, at about US$300 per share. That means that an insider was selling shares at slightly below the current price (US$322). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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. We note that the biggest single sale was 54% of Joseph Portera’s holding.
Over the last year we saw more insider selling of Costco Wholesale shares, than buying. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Costco Wholesale Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at Costco Wholesale. In total, insiders sold US$3.5m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the insiders think that the shares are a bargain.
Insider Ownership of Costco Wholesale
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Costco Wholesale insiders own about US$749m worth of shares (which is 0.5% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Costco Wholesale Insiders?
Insiders sold stock recently, but they haven’t been buying. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. But it is good to see that Costco Wholesale is growing earnings. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. Of course, the future is what matters most. So if you are interested in Costco Wholesale, you should check out this free report on analyst forecasts for the company.
But note: Costco Wholesale may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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