We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Johnson & Johnson (NYSE:JNJ), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. 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. 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 Johnson & Johnson
In the last twelve months, the biggest single sale by an insider was when Controller & Chief Accounting Officer Ronald Kapusta sold US$1.2m worth of shares at a price of US$145 per share. So we know that an insider sold shares at around the present share price of US$129. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment. Ronald Kapusta was the only individual insider to sell shares in the last twelve months.
In the last twelve months insiders purchased 3.75k shares for US$503k. But they sold 19.98k for US$2.8m. Ronald Kapusta sold a total of 19.98k shares over the year at an average price of US$142. The chart below shows insider transactions (by individuals) over the last year. 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 alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Johnson & Johnson Have Sold Stock Recently
There was substantially more insider selling, than buying, of Johnson & Johnson shares over the last three months. In that time, Ronald Kapusta dumped US$1.8m worth of shares. Meanwhile insiders bought US$503k worth, as we said above. Since the selling really does outweigh the buying, we’d say that these transactions may suggest that some insiders feel the shares are not cheap.
Does Johnson & Johnson 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that Johnson & Johnson insiders own 0.05% of the company, worth about US$173m. 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 Johnson & Johnson Insider Transactions Indicate?
The stark truth for Johnson & Johnson is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Johnson & Johnson.
Of course Johnson & Johnson may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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 firstname.lastname@example.org.