It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in TE Connectivity Ltd. (NYSE:TEL).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At TE Connectivity
In the last twelve months, the biggest single sale by an insider was when the President of Industrial Solutions, Kevin Rock, sold US$2.5m worth of shares at a price of US$95.08 per share. That means that an insider was selling shares at around the current price of US$91.22. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).
All up, insiders sold more shares in TE Connectivity than they bought, over the last year. They sold for an average price of about US$90.93. It's not too encouraging to see that insiders have sold at below the current price. But we wouldn't put too much weight on the insider selling. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
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TE Connectivity Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of TE Connectivity shares over the last three months. In total, President of Transportation Solutions Steven Merkt sold US$445k worth of shares in that time. On the flip side, Director Daniel Phelan spent US$14k on purchasing shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.
Does TE Connectivity Boast High 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. TE Connectivity insiders own about US$73m worth of shares. That equates to 0.2% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At TE Connectivity Tell Us?
Unfortunately, there has been more insider selling of TE Connectivity 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 it is good to see that TE Connectivity is growing earnings. Insiders own shares, but we're still pretty cautious, given the history of sales. So we'd only buy after careful consideration. Of course, the future is what matters most. So if you are interested in TE Connectivity, you should check out this free report on analyst forecasts for the company.
Of course TE Connectivity 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, but not derivative transactions.
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 email@example.com. 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.