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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 DexCom, Inc. (NASDAQ:DXCM), you may well want to know whether insiders have been buying or selling.
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, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
DexCom Insider Transactions Over The Last Year
The Executive Chairman, Kevin Sayer, made the biggest insider sale in the last 12 months. That single transaction was for US$3.8m worth of shares at a price of US$143 each. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$144. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 12% of Kevin Sayer's holding.
We note that in the last year insiders divested 176k shares for a total of US$25m. In the last year DexCom insiders didn't buy any company stock. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at DexCom Have Sold Stock Recently
The last quarter saw substantial insider selling of DexCom shares. In total, Donald Abbey sold US$1.1m 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.
Does DexCom Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. DexCom insiders own 1.3% of the company, currently worth about US$170m 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 DexCom Insider Transactions Indicate?
An insider hasn't bought DexCom stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in DexCom, you should check out this free report on analyst forecasts for the company.
But note: DexCom 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.
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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.