Don't Ignore The Insider Selling In AutoNation

We wouldn't blame AutoNation, Inc. (NYSE:AN) shareholders if they were a little worried about the fact that Edward Lampert, a company insider, recently netted about US$99m selling shares at an average price of US$151. That sale reduced their total holding by 14% which is hardly insignificant, but far from the worst we've seen.

See our latest analysis for AutoNation

AutoNation Insider Transactions Over The Last Year

In fact, the recent sale by Edward Lampert was the biggest sale of AutoNation shares made by an insider individual in the last twelve months, according to our records. So what is clear is that an insider saw fit to sell at around the current price of US$162. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).

In the last twelve months insiders purchased 8.42k shares for US$1.2m. On the other hand they divested 2.16m shares, for US$326m. All up, insiders sold more shares in AutoNation than they bought, over 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!

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

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. It's great to see that AutoNation insiders own 11% of the company, worth about US$734m. 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 AutoNation Insiders?

The stark truth for AutoNation is that there has been more insider selling than insider buying in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we've found that AutoNation has 3 warning signs (2 can't be ignored!) that deserve your attention before going any further with your analysis.

Of course AutoNation may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.