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 before you buy or sell Gilead Sciences, Inc. (NASDAQ:GILD), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
Gilead Sciences Insider Transactions Over The Last Year
Chief Patient Officer Gregg Alton made the biggest insider sale in the last 12 months. That single transaction was for US$1.2m worth of shares at a price of US$81.54 each. That means that an insider was selling shares at around the current price of US$67.72. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
We note that in the last year insiders divested 19.44k shares for a total of US$1.6m. All up, insiders sold more shares in Gilead Sciences than they bought, over the last year. The average sell price was around US$81.22. We don’t gain much confidence from insider selling near the recent share price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. The chart below shows insider transactions over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Gilead Sciences better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Gilead Sciences
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. A high insider ownership often makes company leadership more mindful of shareholder interests. Gilead Sciences insiders own 0.7% of the company, currently worth about US$569m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Gilead Sciences Tell Us?
It doesn’t really mean much that no insider has traded Gilead Sciences shares in the last quarter. We don’t take much encouragement from the transactions by Gilead Sciences insiders. And we’re not picking up on high enough insider ownership to give us any 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: Gilead Sciences 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.