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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 versus if they selling is usually more beneficial, 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 would consider it foolish to ignore insider transactions altogether.
See our latest analysis for Broadcom
The Last 12 Months Of Insider Transactions At Broadcom
In the last twelve months, the biggest single sale by an insider was when the President, Hock Tan, sold US$19m worth of shares at a price of US$626 per share. That means that an insider was selling shares at slightly below the current price (US$889). 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was just 12% of Hock Tan's stake.
Insiders in Broadcom didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders At Broadcom Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Broadcom. Specifically, insiders ditched US$6.1m 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
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Broadcom insiders own about US$5.4b worth of shares (which is 1.5% 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.
What Might The Insider Transactions At Broadcom Tell Us?
Insiders haven't bought Broadcom stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. But it is good to see that Broadcom is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. Every company has risks, and we've spotted 3 warning signs for Broadcom you should know about.