Insiders Made Right Decision To Sell As Super Micro Computer Dips 11%

Insiders at Super Micro Computer, Inc. (NASDAQ:SMCI) sold US$25m worth of stock at an average price of US$311 a share over the past year, making the most of their investment. The company's market valuation decreased by US$5.8b after the stock price dropped 11% over the past week, but insiders were spared from painful losses.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Super Micro Computer

The Last 12 Months Of Insider Transactions At Super Micro Computer

Over the last year, we can see that the biggest insider sale was by the Founder, Charles Liang, for US$13m worth of shares, at about US$252 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$785. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 0.9% of Charles Liang's holding.

In total, Super Micro Computer insiders sold more than they bought over the last year. The average sell price was around US$311. It's not particularly great to see insiders were selling shares at below recent prices. But we wouldn't put too much weight on the insider selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like Super Micro Computer better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insider Ownership Of Super Micro Computer

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Super Micro Computer insiders own 14% of the company, worth about US$6.6b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Super Micro Computer Tell Us?

It doesn't really mean much that no insider has traded Super Micro Computer shares in the last quarter. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Super Micro Computer insider transactions don't fill us with confidence. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Super Micro Computer. At Simply Wall St, we've found that Super Micro Computer has 3 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.