We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we’ll take a look at whether insiders have been buying or selling shares in Cognizant Technology Solutions Corporation (NASDAQ:CTSH).
What Is Insider Buying?
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 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.’
Cognizant Technology Solutions Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when President Rajeev Mehta sold US$1.7m worth of shares at a price of US$75.86 per share. So we know that an insider sold shares at around the present share price of US$63.70. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
In total, Cognizant Technology Solutions insiders sold more than they bought over the last year. The sellers received a price of around US$77.78, 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. The chart below shows insider transactions 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 alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insiders at Cognizant Technology Solutions Have Sold Stock Recently
The last quarter saw substantial insider selling of Cognizant Technology Solutions shares. In total, Gajakarnan Kandiah sold US$114k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Does Cognizant Technology Solutions 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. Cognizant Technology Solutions insiders own 0.3% of the company, currently worth about US$122m 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 Cognizant Technology Solutions Insider Transactions Indicate?
An insider hasn’t bought Cognizant Technology Solutions stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cognizant Technology Solutions.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.