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We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Applied Materials, Inc. (NASDAQ:AMAT), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Applied Materials
The Senior VP & CTO, Omkaram Nalamasu, made the biggest insider sale in the last 12 months. That single transaction was for US$5.8m worth of shares at a price of US$40.73 each. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$41.23. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 75.1% of Omkaram Nalamasu's holding.
In the last twelve months insiders netted US$7.0m for 170k shares sold. In the last year Applied Materials insiders didn't buy any company stock. The chart below shows insider transactions (by 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!
I will like Applied Materials better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Applied Materials Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Applied Materials shares. Specifically, insiders ditched US$7.0m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Many investors like to check how much of a company is owned by 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. Applied Materials insiders own about US$127m worth of shares (which is 0.3% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Applied Materials Tell Us?
Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. On the plus side, Applied Materials makes money, and is growing profits. 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 Applied Materials, you should check out this free report on analyst forecasts for the company.
But note: Applied Materials 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.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.