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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 before you buy or sell Cerner Corporation (NASDAQ:CERN), you may well want to know whether insiders have been buying or selling.
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Cerner Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the , Clifford Illig, for US$25m worth of shares, at about US$58.76 per share. That means that even when the share price was below the current price of US$74.53, an insider wanted to cash in some shares. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 3.4% of Clifford Illig's holding.
In the last twelve months insiders purchased 16600 shares for US$1.1m. But they sold 1.2m for US$72m. Over the last year we saw more insider selling of Cerner 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!
I will like Cerner better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Cerner Insiders Bought Stock Recently
There has been significantly more insider buying, than selling, at Cerner, over the last three months. Insiders spent US$1.1m on shares. But insiders only sold shares worth US$389k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Does Cerner 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. Cerner insiders own about US$827m worth of shares (which is 3.4% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Cerner Tell Us?
The recent insider purchases are heartening. However, the longer term transactions are not so encouraging. The high levels of insider ownership, and the recent buying by some insiders, suggests they are well aligned and optimistic. 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 Cerner 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 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.