Possible bearish signals as The Home Depot, Inc. (NYSE:HD) insiders disposed of US$9.6m worth of stock

Over the past year, many The Home Depot, Inc. (NYSE:HD) 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.

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.

See our latest analysis for Home Depot

The Last 12 Months Of Insider Transactions At Home Depot

In the last twelve months, the biggest single sale by an insider was when the Executive Vice President of Customer Experience, Matthew Carey, sold US$4.0m worth of shares at a price of US$316 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$324. 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. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. It is worth noting that this sale was only 27% of Matthew Carey’s holding.

In the last twelve months insiders purchased 3.08k shares for US$932k. On the other hand they divested 30.41k shares, for US$9.6m. Over the last year we saw more insider selling of Home Depot shares, than buying. 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!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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Insiders At Home Depot Have Sold Stock Recently

There was substantially more insider selling, than buying, of Home Depot shares over the last three months. In total, insiders sold US$5.3m worth of shares in that time. On the flip side, Independent Director Paula Santilli spent US$500k on purchasing shares. Because the selling vastly outweighs the buying, we’d say this is a somewhat bearish sign.

Does Home Depot Boast High Insider Ownership?

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. We usually like to see fairly high levels of insider ownership. It’s great to see that Home Depot insiders own 0.07% of the company, worth about US$225m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Home Depot Insiders?

Unfortunately, there has been more insider selling of Home Depot stock, than buying, in the last three months. Zooming out, the longer term picture doesn’t give us much comfort. On the plus side, Home Depot makes money, and is growing profits. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. 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. For example – Home Depot has 2 warning signs we think 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, but not derivative transactions.

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.

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