We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 The Charles Schwab Corporation (NYSE:SCHW).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Charles Schwab Insider Transactions Over The Last Year
The Founder & Chairman, Charles Schwab, made the biggest insider sale in the last 12 months. That single transaction was for US$37m worth of shares at a price of US$60.95 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$75.72. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 0.5% of Charles Schwab's holding.
In total, Charles Schwab insiders sold more than they bought over the last year. The average sell price was around US$62.05. It's not too encouraging to see that insiders have sold at below the current price. Since insiders sell for many reasons, we wouldn't put too much weight on it. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Charles Schwab Have Sold Stock Recently
The last quarter saw substantial insider selling of Charles Schwab shares. In total, insiders dumped US$114m 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 Charles Schwab
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Charles Schwab insiders own 6.8% of the company, currently worth about US$9.7b based on the recent share price. 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 Do The Charles Schwab Insider Transactions Indicate?
Insiders sold Charles Schwab shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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. Our analysis shows 3 warning signs for Charles Schwab (1 can't be ignored!) and we strongly recommend you look at them before investing.
Of course Charles Schwab 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.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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