It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Seattle Genetics, Inc. (NASDAQ:SGEN).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
See our latest analysis for Seattle Genetics
Seattle Genetics Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Co-Founder, Clay Siegall, sold US$8.3m worth of shares at a price of US$168 per share. So what is clear is that an insider saw fit to sell at around the current price of US$158. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
In the last year Seattle Genetics insiders didn’t buy any company stock. 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!
I will like Seattle Genetics better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership
Many investors like to check how much of a company is owned by 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. Seattle Genetics insiders own 0.9% of the company, currently worth about US$259m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Seattle Genetics Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. While we feel good about high insider ownership of Seattle Genetics, we can’t say the same about the selling of shares. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. In terms of investment risks, we’ve identified 1 warning sign with Seattle Genetics and understanding it should be part of your investment process.
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, but not derivative transactions.
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