We often see insiders buying up shares in companies that perform well over the long term. 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 Cisco Systems, Inc. (NASDAQ:CSCO), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
Check out our latest analysis for Cisco Systems
Cisco Systems Insider Transactions Over The Last Year
The Independent Director, Martha Burns, made the biggest insider sale in the last 12 months. That single transaction was for US$721k worth of shares at a price of US$51.55 each. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$53.74. 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 18% of Martha Burns’s stake. The only individual insider seller over the last year was Martha Burns.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It appears that Cisco Systems insiders own 0.03% of the company, worth about US$71m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Cisco Systems Tell Us?
The fact that there have been no Cisco Systems insider transactions recently certainly doesn’t bother us. Still, the insider transactions at Cisco Systems in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. Of course, the future is what matters most. So if you are interested in Cisco Systems, you should check out this free report on analyst forecasts for the company.
But note: Cisco Systems 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 currently account for open market transactions and private dispositions, but not derivative transactions.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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