We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in CarMax, Inc. (NYSE:KMX).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
CarMax Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Non-Executive Chairman, Thomas Folliard, for US$8.1m worth of shares, at about US$76.03 per share. That means that an insider was selling shares at around the current price of US$73.90. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. We note that this sale took place at around the current price, so it isn’t a major concern, though it’s hardly a good sign.
Over the last year, we note insiders sold 178k shares worth US$14m. Insiders in CarMax didn’t buy any shares in the last year. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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).
Insiders at CarMax Have Sold Stock Recently
The last quarter saw substantial insider selling of CarMax shares. In total, insiders sold US$181k worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does CarMax Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that CarMax insiders own 0.5% of the company, worth about US$58m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About CarMax Insiders?
Insiders sold CarMax shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. But since CarMax is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. So we’d only buy after careful consideration. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for CarMax.
Of course CarMax may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.