Are Insiders Selling Analog Devices, Inc. (NASDAQ:ADI) Stock?

By
Simply Wall St
Published
June 20, 2021
NasdaqGS:ADI
Source: Shutterstock

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Analog Devices, Inc. (NASDAQ:ADI).

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.

Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.

Check out our latest analysis for Analog Devices

Analog Devices Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the President, Vincent Roche, sold US$3.2m worth of shares at a price of US$115 per share. That means that even when the share price was below the current price of US$162, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was 53% of Vincent Roche's holding.

All up, insiders sold more shares in Analog Devices 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. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NasdaqGS:ADI Insider Trading Volume June 21st 2021

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Analog Devices Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Analog Devices shares. Specifically, insiders ditched US$1.2m 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.

Insider Ownership of Analog Devices

Many investors like to check how much of a company is owned by 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. Analog Devices insiders own 0.3% of the company, currently worth about US$190m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Analog Devices Insiders?

Insiders sold Analog Devices shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. But since Analog Devices is profitable and growing, we're not too worried by this. 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. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Case in point: We've spotted 2 warning signs for Analog Devices you should be aware of.

But note: Analog Devices 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, 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.