Possible Bearish Signals With NetApp Insiders Disposing Stock

Over the past year, many NetApp, Inc. (NASDAQ:NTAP) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. 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, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for NetApp

The Last 12 Months Of Insider Transactions At NetApp

The Independent Director, George Shaheen, made the biggest insider sale in the last 12 months. That single transaction was for US$3.5m worth of shares at a price of US$122 each. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$123. 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 89% of George Shaheen's holding.

Insiders in NetApp didn't buy any shares in the last year. The chart below shows insider transactions (by companies and 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 are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

Insider Ownership Of NetApp

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. NetApp insiders own about US$109m worth of shares (which is 0.4% of the company). 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 NetApp Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the NetApp insiders selling. Therefore, you should definitely take a look at this FREE report showing analyst forecasts for NetApp.

Of course NetApp may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.