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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 Thermo Fisher Scientific Inc. (NYSE:TMO), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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.'
Thermo Fisher Scientific Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Senior VP & President of Customer Channels, Gregory Herrema, sold US$1.8m worth of shares at a price of US$247 per share. That means that even when the share price was below the current price of US$292, an insider wanted to cash in some shares. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 25.9% of Gregory Herrema's holding.
We note that in the last year insiders divested 18139 shares for a total of US$4.5m. Insiders in Thermo Fisher Scientific didn't buy any shares in the last year. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Thermo Fisher Scientific 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 Thermo Fisher Scientific Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Thermo Fisher Scientific. In total, C. Harris dumped US$74k 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.
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. Thermo Fisher Scientific insiders own about US$242m worth of shares (which is 0.2% of the company). 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 Thermo Fisher Scientific Insider Transactions Indicate?
An insider sold stock recently, but they haven't been buying. And even if we look to the last year, we didn't see any purchases. But it is good to see that Thermo Fisher Scientific is growing earnings. 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 Thermo Fisher Scientific, you should check out this free report on analyst forecasts for the company.
Of course Thermo Fisher Scientific 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.
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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.