International Business Machines Insiders Sold US$5.6m Of Shares Suggesting Hesitancy

Over the past year, many International Business Machines Corporation (NYSE:IBM) insiders sold a significant stake in the company which may have piqued investors' interest. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for International Business Machines

The Last 12 Months Of Insider Transactions At International Business Machines

In the last twelve months, the biggest single sale by an insider was when the CFO and Senior VP of Finance & Operations, James Kavanaugh, sold US$5.2m worth of shares at a price of US$134 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$144. 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. We note that the biggest single sale was only 30% of James Kavanaugh's holding.

All up, insiders sold more shares in International Business Machines than they bought, over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company 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. It appears that International Business Machines insiders own 0.07% of the company, worth about US$98m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About International Business Machines Insiders?

It doesn't really mean much that no insider has traded International Business Machines shares in the last quarter. We don't take much encouragement from the transactions by International Business Machines insiders. The modest level of insider ownership is, at least, some comfort. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. While conducting our analysis, we found that International Business Machines has 4 warning signs and it would be unwise to ignore these.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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. 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.