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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in UnitedHealth Group Incorporated (NYSE:UNH).
What Is Insider Selling?
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.
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.'
The Last 12 Months Of Insider Transactions At UnitedHealth Group
Over the last year, we can see that the biggest insider sale was by the Lead Independent Director, Richard Burke, for US$5.3m worth of shares, at about US$263 per share. So what is clear is that an insider saw fit to sell at around the current price of US$244. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
Over the last year, we can see that insiders have bought 26430 shares worth US$6.1m. But they sold 128k for US$33m. Over the last year we saw more insider selling of UnitedHealth Group shares, than buying. The chart below shows insider transactions (by individuals) over the last year. 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).
UnitedHealth Group Insiders Are Selling The Stock
We've seen more insider selling than insider buying at UnitedHealth Group recently. In total, Richard Burke sold US$7.2m worth of shares in that time. Meanwhile insiders bought US$6.1m worth, as we said above. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that UnitedHealth Group insiders own 0.6% of the company, worth about US$1.5b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At UnitedHealth Group Tell Us?
The stark truth for UnitedHealth Group is that there has been more insider selling than insider 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 UnitedHealth Group is growing earnings. 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 UnitedHealth Group, you should check out this free report on analyst forecasts for the company.
But note: UnitedHealth Group 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 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.