The fact that multiple The Home Depot, Inc. (NYSE:HD) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. 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.
Although we don’t think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
See our latest analysis for Home Depot
The insider, John Deaton, made the biggest insider sale in the last 12 months. That single transaction was for US$5.5m worth of shares at a price of US$363 each. That means that an insider was selling shares at slightly below the current price (US$389). 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 62% of John Deaton’s holding.
Home Depot insiders didn’t buy any shares over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.
The last quarter saw substantial insider selling of Home Depot shares. In total, insiders dumped US$334k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Home Depot insiders own about US$211m worth of shares (which is 0.05% 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.
