Over the past year, many The Charles Schwab Corporation (NYSE:SCHW) 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, 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, we would consider it foolish to ignore insider transactions altogether.
Charles Schwab Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the Founder & Co-Chairman, Charles Schwab, sold US$19m worth of shares at a price of US$69.43 per share. That means that even when the share price was below the current price of US$71.87, an insider wanted to cash in some shares. 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. 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 0.2% of Charles Schwab's stake.
All up, insiders sold more shares in Charles Schwab than they bought, over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Charles Schwab better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Charles Schwab Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Charles Schwab shares. In total, Founder & Co-Chairman Charles Schwab sold US$34m 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.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Charles Schwab insiders own 6.2% of the company, currently worth about US$8.4b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Charles Schwab Insider Transactions Indicate?
An insider sold Charles Schwab shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But since Charles Schwab is profitable and growing, we're not too worried by this. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. 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. In terms of investment risks, we've identified 1 warning sign with Charles Schwab and understanding this should be part of your investment process.
Of course Charles Schwab 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, 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.
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