Need To Know: Gilead Sciences, Inc. (NASDAQ:GILD) Insiders Have Been Selling Shares

We often see insiders buying up shares in companies that perform well over the long term. 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 Gilead Sciences, Inc. (NASDAQ:GILD).

Do Insider Transactions Matter?

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, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.

View our latest analysis for Gilead Sciences

Gilead Sciences Insider Transactions Over The Last Year

The Executive VP of Corporate Affairs, Brett Pletcher, made the biggest insider sale in the last 12 months. That single transaction was for US$359k worth of shares at a price of US$63.31 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$78.55. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 21% of Brett Pletcher's stake. Brett Pletcher was the only individual insider to sell shares in the last twelve months.

Brett Pletcher sold a total of 9980 shares over the year at an average price of US$64.15. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insider Ownership of Gilead Sciences

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. Gilead Sciences insiders own 0.2% of the company, currently worth about US$201m 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 Gilead Sciences Insiders?

The fact that there have been no Gilead Sciences insider transactions recently certainly doesn't bother us. While we feel good about high insider ownership of Gilead Sciences, we can't say the same about the selling of shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example - Gilead Sciences has 2 warning signs we think you should be aware of.

Of course Gilead Sciences may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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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