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We often see insiders buying up shares in companies that perform well over the long term. 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 McCormick & Company, Incorporated (NYSE:MKC).
Do Insider Transactions Matter?
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 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.'
The Last 12 Months Of Insider Transactions At McCormick
In the last twelve months, the biggest single sale by an insider was when the Independent Director, Margaret Mary Preston, sold US$596k worth of shares at a price of US$154 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$160. 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. This single sale was just 39% of Margaret Mary Preston's stake.
In the last twelve months insiders netted US$915k for 5935 shares sold. Insiders in McCormick didn't buy any shares in the last year. 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!
I will like McCormick better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at McCormick Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at McCormick. Specifically, insiders ditched US$915k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. McCormick insiders own 0.5% of the company, currently worth about US$100m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The McCormick Insider Transactions Indicate?
Insiders haven't bought McCormick 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. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.