Insider Spends US$1.3m Buying More Shares In Merck

Merck & Co., Inc. (NYSE:MRK) shareholders (or potential shareholders) will be happy to see that the Independent Director, Douglas Baker, recently bought a whopping US$1.3m worth of stock, at a price of US$88.50. That increased their holding by a full 1,500%, which arguably implies the sort of confidence required for a shy sweet-natured nerd to ask the most popular kid in the school to go out on a date.

See our latest analysis for Merck

The Last 12 Months Of Insider Transactions At Merck

In fact, the recent purchase by Douglas Baker was the biggest purchase of Merck shares made by an insider individual in the last twelve months, according to our records. That means that an insider was happy to buy shares at above the current price of US$87.28. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months insiders purchased 17.83k shares for US$1.6m. On the other hand they divested 3.36k shares, for US$334k. Overall, Merck insiders were net buyers during the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Insider Ownership Of Merck

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Merck insiders own 0.05% of the company, currently worth about US$111m 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.

So What Does This Data Suggest About Merck Insiders?

The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest Merck insiders are well aligned, and quite possibly think the share price is too low. Nice! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with Merck and understanding this should be part of your investment process.

But note: Merck 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.