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Merck Insiders Sold US$15m Of Shares Suggesting Hesitancy

The fact that multiple Merck & Co., Inc. (NYSE:MRK) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. 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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

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.

See our latest analysis for Merck

Merck Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Executive VP & President of Merck Animal Health, Richard DeLuca, for US$4.6m worth of shares, at about US$105 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$125. 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. 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. We note that the biggest single sale was only 28% of Richard DeLuca's holding.

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In total, Merck insiders sold more than they bought over 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!

insider-trading-volume
insider-trading-volume

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insiders At Merck Have Sold Stock Recently

The last three months saw significant insider selling at Merck. Specifically, insiders ditched US$6.4m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

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. Merck insiders own 0.07% of the company, currently worth about US$212m based on the recent share price. 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 Do The Merck Insider Transactions Indicate?

Insiders sold Merck shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. 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 Merck. You'd be interested to know, that we found 5 warning signs for Merck and we suggest you have a look.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.