Insiders At Brown & Brown Sold US$21m In Stock, Alluding To Potential Weakness

The fact that multiple Brown & Brown, Inc. (NYSE:BRO) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Brown & Brown

Brown & Brown Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Chairman of the Board, J. Brown, sold US$20m worth of shares at a price of US$86.05 per share. That means that even when the share price was below the current price of US$101, an insider wanted to cash in some shares. 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. It is worth noting that this sale was only 0.6% of J. Brown's holding.

Insiders in Brown & Brown didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insiders At Brown & Brown Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Brown & Brown. In total, insiders sold US$552k 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

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Brown & Brown insiders own about US$4.8b worth of shares (which is 17% of the company). 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 Do The Brown & Brown Insider Transactions Indicate?

Insiders haven't bought Brown & Brown stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. But it is good to see that Brown & Brown is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Brown & Brown.

But note: Brown & Brown 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.