Insiders At International Business Machines Sold US$2.6m In Stock, Alluding To Potential Weakness

In the last year, many International Business Machines Corporation (NYSE:IBM) insiders sold a substantial stake in the company which may have sparked shareholders’ attention. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for International Business Machines

Over the last year, we can see that the biggest insider sale was by the insider, Michelle Browdy, for US$1.8m worth of shares, at about US$185 per share. That means that even when the share price was below the current price of US$223, 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. However, while insider selling is sometimes discouraging, it’s only a weak signal. We note that the biggest single sale was only 7.6% of Michelle Browdy’s holding.

In total, International Business Machines insiders sold more than they bought over the last year. 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!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

There was substantially more insider selling, than buying, of International Business Machines shares over the last three months. In total, Senior VP & Chief Human Resources Officer Nickle LaMoreaux sold US$775k worth of shares in that time. On the flip side, insider Alfred Zollar spent US$197k on purchasing shares (as mentioned above) . Generally this level of net selling might be considered a bit bearish.

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that International Business Machines insiders own 0.1% of the company, worth about US$200m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

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