Over the past year, many Analog Devices, Inc. (NASDAQ:ADI) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
The Last 12 Months Of Insider Transactions At Analog Devices
The Executive Vice President of Global Operations & Technology, Vivek Jain, made the biggest insider sale in the last 12 months. That single transaction was for US$1.9m worth of shares at a price of US$176 each. That means that an insider was selling shares at slightly below the current price (US$180). 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. 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 59% of Vivek Jain's holding.
In total, Analog Devices insiders sold more than they bought over the last year. They sold for an average price of about US$182. It's not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn't put too much weight on it. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. 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 growing companies that insiders are buying.
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. It's great to see that Analog Devices insiders own 0.4% of the company, worth about US$319m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Analog Devices 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 Analog Devices insiders selling. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. While conducting our analysis, we found that Analog Devices has 1 warning sign and it would be unwise to ignore it.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.