We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Illumina, Inc. (NASDAQ:ILMN).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. 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.'
Illumina Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Executive Chairman, Jay Flatley, for US$391k worth of shares, at about US$268 per share. That means that even when the share price was below the current price of US$319, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 0.4% of Jay Flatley's holding. The only individual insider seller over the last year was Jay Flatley.
You can see the insider transactions (by 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does Illumina Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Illumina insiders own 0.4% of the company, currently worth about US$178m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Illumina Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. While we feel good about high insider ownership of Illumina, we can't say the same about the selling of shares. Of course, the future is what matters most. So if you are interested in Illumina, you should check out this free report on analyst forecasts for the company.
But note: Illumina 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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