Many Broadcom Inc. (NASDAQ:AVGO) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.
While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
Broadcom Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the President, Hock Tan, for US$19m worth of shares, at about US$626 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$817. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. 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 12% of Hock Tan's holding.
Over the last year, we can see that insiders have bought 12.00k shares worth US$10m. But insiders sold 51.90k shares worth US$34m. Over the last year we saw more insider selling of Broadcom shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Broadcom better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Broadcom Insiders Bought Stock Recently
At Broadcom,over the last quarter, we have observed quite a lot more insider buying than insider selling. Insiders spent US$10m on shares. But Lead Independent Director Eddy Hartenstein sold shares worth US$1.3m. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Broadcom insiders own about US$4.9b worth of shares (which is 1.5% 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?
The recent insider purchases are heartening. But we can't say the same for the transactions over the last 12 months. Overall, we'd prefer see a more sustained buying from directors, but with a significant insider holding and more recent purchases, Broadcom insiders are reasonably well aligned, and optimistic for the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Broadcom. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Broadcom.
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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