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 CarMax, Inc. (NYSE:KMX), 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Colombia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
The Last 12 Months Of Insider Transactions At CarMax
In the last twelve months, the biggest single sale by an insider was when Non-Executive Chairman Thomas Folliard sold US$8.1m worth of shares at a price of US$76.03 per share. That means that an insider was selling shares at around the current price of US$60.26. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
Happily, we note that in the last year insiders paid US$313k for 5.04k shares. But insiders sold 226.20k shares worth US$16m. Over the last year we saw more insider selling of CarMax shares, than buying. The sellers received a price of around US$72.56, on average. It’s not particularly great to see insiders were selling shares around current prices. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. You can see a visual depiction of insider transactions over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at CarMax Have Sold Stock Recently
The last three months saw significant insider selling at CarMax. Specifically, Jon Daniels ditched US$95k 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.
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. CarMax insiders own 0.5% of the company, currently worth about US$52m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At CarMax Tell Us?
An insider hasn’t bought CarMax stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. On the plus side, CarMax makes money, and is growing profits. 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.
But note: CarMax 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.
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 email@example.com.