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Possible Bearish Signals With Moody's Insiders Disposing Stock

In the last year, many Moody's Corporation (NYSE:MCO) insiders sold a substantial stake in the company which may have sparked shareholders' attention. 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.

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.

View our latest analysis for Moody's

Moody's Insider Transactions Over The Last Year

The insider, Mark Kaye, made the biggest insider sale in the last 12 months. That single transaction was for US$1.3m worth of shares at a price of US$341 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$397. 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. This single sale was just 46% of Mark Kaye's stake.

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In the last year Moody's insiders didn't buy any company stock. 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!

insider-trading-volume
insider-trading-volume

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.

Insiders At Moody's Have Sold Stock Recently

The last quarter saw substantial insider selling of Moody's shares. In total, Senior VP & General Counsel Richard Steele sold US$116k 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.

Insider Ownership Of Moody's

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Moody's insiders own about US$70m worth of shares. That equates to 0.1% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Moody's Tell Us?

An insider hasn't bought Moody's stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. But since Moody's is profitable and growing, we're not too worried by this. While insiders do own shares, they don't own a heap, and they have been selling. We'd practice some caution before buying! While we like knowing 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. Case in point: We've spotted 1 warning sign for Moody's you should be aware of.

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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.