many Walmart Co., Ltd. (NYSE:WMT) insiders have unloaded shares in their company over the past year, which may be of interest to the company’s shareholders. When evaluating insider transactions, it’s usually more useful to know whether insiders are buying or selling. Because the latter is open to many interpretations. However, if a large number of insiders have been selling, shareholders should investigate further.
While we never say investors should base their decisions solely on the actions of a company’s directors, we believe it would be foolish to ignore insider trading entirely.
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Insider transactions at Walmart over the past 12 months
Executive Vice President Judith McKenna has made the largest insider sale in the past 12 months. In this one trade of his, he traded $3 million worth of stock at a price of $148 per share. So it’s clear that the insider wanted to take cash off the table, even if it was below his current price of $161. We usually consider it a negative when insiders sell, especially if they sell below the current price, because it means the insider thought a lower price was warranted. However, while insider selling can sometimes be discouraging, it can only be a weak signal. Note that the single largest sale was just his 8.1% of Judith McKenna’s holdings.
After all, insiders sold more Walmart stock than they bought in the last year. The chart below depicts insider transactions (by companies and individuals) over the past year. Click on the chart to see all individual trades, including stock price, individual, and date.
If you like to buy stocks that insiders are buying, rather than selling, you might like this free List of companies. (Hint: Insiders are buying them).
Walmart insiders are selling stock
There has been significant insider selling at Walmart over the past three months. During that time, President C. McMillon sold shares totaling US$4.7m worth, but the company did not record any purchases. This could suggest that some insiders think the share price is not cheap.
Insider ownership
Another way to test the alignment between a company’s leaders and other shareholders is to look at the number of shares they own. Typically, the higher the insider ownership, the more likely it is that insiders are incentivized to build the company for the long term. Walmart insiders own around $4 billion worth of shares, or 0.9% of the company. Most shareholders would welcome this type of insider ownership, as it suggests management incentives are well aligned with other shareholders.
So what does this data suggest about Walmart insiders?
Insiders haven’t bought Walmart stock in the past three months, but there has been some selling. Despite some insider buying, the long-term picture doesn’t make us feel all that positive. On the plus side, Walmart is profitable and its profits are growing. It’s true that insiders own a significant amount of stock in the company (and that’s good), but just analyzing their transactions doesn’t give us confidence in the company. So while these insider transactions can help us form a theory about the stock, it’s also worth knowing what risks this company faces.Every company has risks, and we found that 1 Warning Sign for Walmart you should know about.
If you want to check out another company with potentially better financials, don’t miss this free List of interesting companies with high return on equity and low debt.
For the purposes of this article, insiders are individuals who report their transactions to the relevant regulatory body. The Company currently only accounts for open market transactions and private dispositions of direct profits, and does not account for derivative transactions or indirect profits.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.