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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 Cerner Corporation (NASDAQ:CERN).
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
The Last 12 Months Of Insider Transactions At Cerner
The , Clifford Illig, made the biggest insider sale in the last 12 months. That single transaction was for US$25m worth of shares at a price of US$58.76 each. That means that even when the share price was below the current price of US$72.74, an insider wanted to cash in some shares. 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. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. We note that the biggest single sale was only 3.4% of Clifford Illig’s holding.
In the last twelve months insiders purchased 16600 shares for US$1.1m. But insiders sold 1.6m shares worth US$96m. In total, Cerner insiders sold more than they bought over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Cerner better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at Cerner Have Bought Stock Recently
There has been significantly more insider buying, than selling, at Cerner, over the last three months. Insiders spent US$1.1m on shares. On the other hand, Director Linda Dillman netted US$288k by selling. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
Does Cerner Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Cerner insiders own about US$807m worth of shares (which is 3.4% of the company). 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 Does This Data Suggest About Cerner Insiders?
The recent insider purchases are heartening. On the other hand the transaction history, over the last year, isn’t so positive. Overall, we’d prefer see a more sustained buying from directors, but with a significant insider holding and more recent purchases, Cerner insiders are reasonably well aligned, and optimistic for the future. 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.
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.
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 firstname.lastname@example.org. 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.