Should You Be Worried About Insider Transactions At MKS Instruments, Inc. (NASDAQ:MKSI)?

We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in MKS Instruments, Inc. (NASDAQ:MKSI).

Do Insider Transactions Matter?

It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

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’.

See our latest analysis for MKS Instruments

The Last 12 Months Of Insider Transactions At MKS Instruments

Over the last year, we can see that the biggest insider sale was by the CEO & Director, Gerald Colella, for US$379k worth of shares, at about US$75.82 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$91.18. 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. However, while insider selling is sometimes discouraging, it’s only a weak signal. This single sale was just 4.6% of Gerald Colella’s stake.

In the last twelve months insiders netted US$579k for 7358 shares sold. In the last year MKS Instruments insiders didn’t buy any company stock. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

NasdaqGS:MKSI Recent Insider Trading, September 11th 2019
NasdaqGS:MKSI Recent Insider Trading, September 11th 2019

MKS Instruments Insiders Are Selling The Stock

Over the last three months, we’ve seen a bit of insider selling at MKS Instruments. Director Jacqueline Moloney sold just US$49k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the amount sold isn’t enough for us to put any weight on it.

Does MKS Instruments Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it’s a good sign if insiders own a significant number of shares in the company. MKS Instruments insiders own about US$60m worth of shares. That equates to 1.2% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About MKS Instruments Insiders?

While there has not been any insider buying in the last three months, there has been selling. But the sales were small, so we’re not concerned. Recent sales exacerbate our caution arising from analysis of MKS Instruments insider transactions. The modest level of insider ownership is, at least, some comfort. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

But note: MKS Instruments 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.