We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Costco Wholesale Corporation (NASDAQ:COST).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
Costco Wholesale Insider Transactions Over The Last Year
The Executive Vice President of Administration, Franz Lazarus, made the biggest insider sale in the last 12 months. That single transaction was for US$5.2m worth of shares at a price of US$227 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$243. We generally consider it a negative if insiders have been selling on market, 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. This single sale was just 38.2% of Franz Lazarus's stake.
Over the last year we saw more insider selling of Costco Wholesale shares, than buying. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Costco Wholesale Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Costco Wholesale shares over the last three months. In that time, insiders dumped US$8.0m worth of shares. On the other hand we note Director John Meisenbach bought US$728k worth of shares, as previously mentioned. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Costco Wholesale insiders own 0.5% of the company, worth about US$560m. 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 Costco Wholesale Insiders?
Unfortunately, there has been more insider selling of Costco Wholesale stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Costco Wholesale is profitable and growing, we're not too worried by this. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. Of course, the future is what matters most. So if you are interested in Costco Wholesale, you should check out this free report on analyst forecasts for the company.
But note: Costco Wholesale may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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