Yahoo Finance Possible Bearish Signals With Broadcom Insiders Disposing Stock
Many Broadcom Inc. (NASDAQ:AVGO) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
View our latest analysis for Broadcom
Broadcom Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the President, Hock Tan, sold US$22m worth of shares at a price of US$1,127 per share. That means that even when the share price was below the current price of US$1,606, 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. 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. This single sale was just 8.7% of Hock Tan's stake.
Over the last year, we can see that insiders have bought 12.00k shares worth US$10m. But they sold 79.82k shares for US$95m. Over the last year we saw more insider selling of Broadcom shares, than buying. 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!
For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.
Broadcom Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Broadcom. In total, insiders sold US$19m 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 Broadcom
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. 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 Broadcom insiders own 1.3% of the company, worth about US$9.7b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Broadcom Tell Us?
Insiders sold Broadcom shares recently, but they didn't buy any. Zooming out, the longer term picture doesn't give us much comfort. It is good to see high insider ownership, but the insider selling leaves us cautious. While it's good to be aware of 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. You'd be interested to know, that we found 4 warning signs for Broadcom and we suggest you have a look.
Of course Broadcom 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.
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