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 we’ll take a look at whether insiders have been buying or selling shares in Cisco Systems, Inc. (NASDAQ:CSCO).
What Is Insider Buying?
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 don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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 Cisco Systems
Lead Independent Director Carol Bartz made the biggest insider sale in the last 12 months. That single transaction was for US$7.6m worth of shares at a price of US$37.93 each. That means that an insider was selling shares at below the current price (US$47.42). While their view may have changed since they sold, this isn’t a particularly bullish sign. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was 76.1% of Carol Bartz’s holding.
We note that in the last year insiders divested 531.60k shares for a total of US$22m. Over the last year we saw more insider selling of Cisco Systems shares, than buying. The sellers received a price of around US$41.89, on average. It’s not particularly great to see insiders were selling shares around current prices. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. You can see a visual depiction of insider transactions over the last 12 months, 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.
Cisco Systems Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Cisco Systems shares. Specifically, insiders ditched US$7.6m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Does Cisco Systems Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Cisco Systems insiders own about US$82m worth of shares (which is 0.04% of the company). 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 Cisco Systems Insider Transactions Indicate?
Insiders sold Cisco Systems shares recently, but they didn’t buy any. And even if we look to the last year, we didn’t see any purchases. While insiders do own shares, they don’t own a heap, and they have been selling. We’d think twice before buying! 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 Cisco Systems may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.