Over the past year, many Broadcom Inc. (NASDAQ:AVGO) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.
While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.
Check out our latest analysis for Broadcom
Broadcom Insider Transactions Over The Last Year
The President, Hock Tan, made the biggest insider sale in the last 12 months. That single transaction was for US$26m worth of shares at a price of US$173 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$195. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 10% of Hock Tan's holding.
Insiders in Broadcom didn't buy any shares in 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!
I will like Broadcom better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.
Broadcom Insiders Are Selling The Stock
The last three months saw significant insider selling at Broadcom. In total, insiders dumped US$40m 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 insiders think that the shares are a bargain.
Does Broadcom Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Broadcom insiders own about US$12b worth of shares (which is 1.3% 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 Broadcom Insider Transactions Indicate?
Insiders sold Broadcom shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For example - Broadcom has 3 warning signs we think you should be aware of.
Of course Broadcom 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 currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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