Insiders At PC Connection Sold US$3.2m In Stock, Alluding To Potential Weakness

The fact that multiple PC Connection, Inc. (NASDAQ:CNXN) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for PC Connection

PC Connection Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the President & CEO, Timothy McGrath, for US$2.1m worth of shares, at about US$70.71 per share. That means that even when the share price was below the current price of US$72.77, 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 10% of Timothy McGrath's holding.

Insiders in PC Connection didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.

PC Connection Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at PC Connection. In total, Independent Director David Beffa-Negrini sold US$350k 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.

Insider Ownership Of PC Connection

For a common shareholder, it is worth checking how many shares are held by company 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. PC Connection insiders own about US$1.0b worth of shares (which is 54% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About PC Connection Insiders?

An insider hasn't bought PC Connection stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. On the plus side, PC Connection makes money, and is growing profits. 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. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing PC Connection. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of PC Connection.

But note: PC Connection 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.