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It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Analog Devices, Inc. (NASDAQ:ADI), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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.’
Analog Devices Insider Transactions Over The Last Year
The Founder & Chairman, Raymond Stata, made the biggest insider sale in the last 12 months. That single transaction was for US$2.2m worth of shares at a price of US$108 each. So we know that an insider sold shares at around the present share price of US$97.11. 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 117k shares worth US$12m. In the last year Analog Devices insiders didn’t buy any company stock. The chart below shows insider transactions (by individuals) over the last year. 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).
Analog Devices Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Analog Devices shares. Specifically, insiders ditched US$2.2m 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
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. Analog Devices insiders own 0.3% of the company, currently worth about US$125m 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 Does This Data Suggest About Analog Devices Insiders?
Insiders haven’t bought Analog Devices stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn’t show any insider buying. 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. Of course, the future is what matters most. So if you are interested in Analog Devices, you should check out this free report on analyst forecasts for the company.
Of course Analog Devices 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 email@example.com. 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.