We often see insiders buying up shares in companies that perform well over the long term. 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 The Home Depot, Inc. (NYSE:HD), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 equally, we would consider it foolish to ignore insider transactions altogether. 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'.
Home Depot Insider Transactions Over The Last Year
In fact, the recent sale by Matthew Carey was the biggest sale of Home Depot shares made by an insider individual in the last twelve months, according to our records. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$280. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 25%of Matthew Carey's holding.
In the last twelve months insiders purchased 5.87k shares for US$1.2m. But insiders sold 37.37k shares worth US$9.7m. In total, Home Depot insiders sold more than they bought over the last year. You can see the insider transactions (by companies and 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 Home Depot better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Home Depot Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Home Depot shares. Specifically, Executive VP & Chief Information Officer Matthew Carey ditched US$6.0m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Insider Ownership of Home Depot
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Home Depot insiders own 0.1% of the company, currently worth about US$321m 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 Do The Home Depot Insider Transactions Indicate?
An insider sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Home Depot is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Home Depot. In terms of investment risks, we've identified 2 warning signs with Home Depot and understanding these should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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, but not derivative transactions.
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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. 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.
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