Insiders at Texas Instruments Incorporated (NASDAQ:TXN) sold US$8.8m worth of stock, a potential red flag that needs to be monitored
While Texas Instruments Incorporated (NASDAQ:TXN) shareholders have had a good week with the stock up 10%, they shouldn't let their guards down. Although prices were relatively low, insiders chose to sell US$8.8m worth of stock in the past 12 months. This could be a sign of impending weakness.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
Check out our latest analysis for Texas Instruments
The Last 12 Months Of Insider Transactions At Texas Instruments
Over the last year, we can see that the biggest insider sale was by the Chairman, Richard Templeton, for US$5.9m worth of shares, at about US$178 per share. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of US$179. 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. It is worth noting that this sale was only 6.8% of Richard Templeton's holding.
Insiders in Texas Instruments didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership Of Texas Instruments
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. Texas Instruments insiders own about US$177m worth of shares (which is 0.1% 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.
What Might The Insider Transactions At Texas Instruments Tell Us?
It doesn't really mean much that no insider has traded Texas Instruments shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Texas Instruments insiders selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with Texas Instruments and understanding these should be part of your investment process.
But note: Texas Instruments may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, 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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