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 we’ll take a look at whether insiders have been buying or selling shares in CareDx, Inc (NASDAQ:CDNA).
What Is Insider Selling?
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.
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.’
CareDx Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when CEO & Director Peter Maag sold US$2.9m worth of shares at a price of US$28.59 per share. That means that even when the share price was below the current price of US$36.90, an insider wanted to cash in some shares. While their view may have changed since they sold, this isn’t a particularly bullish sign. As a general rule we consider it to be discouraging when insiders are selling below the current price. Please note, however, that this single sale was just 36% of Peter Maag’s stake.
In the last twelve months insiders netted US$6.8m for 223.25k shares sold. All up, insiders sold more shares in CareDx than they bought, over the last year. The sellers received a price of around US$30.37, on average. It’s not particularly great to see insiders were selling shares around current prices. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like CareDx better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
CareDx Insiders Are Selling The Stock
The last three months saw significant insider selling at CareDx. In total, insiders sold US$3.6m 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 directors think that the shares are a bargain.
Does CareDx Boast High Insider Ownership?
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. CareDx insiders own about US$47m worth of shares. That equates to 3.1% of the company. 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 Do The CareDx Insider Transactions Indicate?
Insiders sold stock recently, but they haven’t been buying. And even if we look to the last year, we didn’t see any purchases. Insiders own shares, but we’re still pretty cautious, given the history of sales. We’re in no rush to buy! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for CareDx.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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.