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 we’ll take a look at whether insiders have been buying or selling shares in F5 Networks, Inc. (NASDAQ:FFIV).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
The Last 12 Months Of Insider Transactions At F5 Networks
The Director, Michael Dreyer, made the biggest insider sale in the last 12 months. That single transaction was for US$1.0m worth of shares at a price of US$183 each. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (US$129). So it may not shed much light on insider confidence at current levels.
In the last twelve months insiders netted US$1.5m for 8479 shares sold. F5 Networks insiders didn’t buy any shares over the last year. 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!
F5 Networks Insiders Are Selling The Stock
The last three months saw some F5 Networks insider selling. Executive VP & Chief Strategy Officer Thomas Fountain sold just US$34k worth of shares in that time. It’s not great to see insider selling, nor the lack of recent buyers. But the selling simply isn’t sufficiently substantial to be of much use as a signal.
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. Insiders own 0.3% of F5 Networks shares, worth about US$21m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About F5 Networks Insiders?
While there has not been any insider buying in the last three months, there has been selling. But given the selling was modest, we’re not worried. Recent insider selling makes us a little nervous, in light of the broader picture of F5 Networks insider transactions. But we do like the fact that insiders own a fair chunk of the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for F5 Networks.
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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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