Although Computer Connection, Inc. (NASDAQ:CNXN) shareholders enjoyed a great week with the stock up 9.0%, insiders who sold shares over the past year didn’t fare as well. If they had waited, they might have been able to sell their shares at much higher prices and thus received better value from their investment.
While we would never suggest that investors base their decisions solely on what a company’s directors have done, we would consider it foolish to ignore insider transactions altogether.
Look at the opportunities and risks within the American Electronics industry.
The Last 12 Months Of Internal Transactions At PC Connection
The Independent Director, David Beffa-Negrini, has made the largest insider sale in the last 12 months. That single transaction was for $224k worth of shares at a price of $44.81 each. This means that even when the stock price was below the current price of $51.85, an insider wanted to cash in on some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please note, however, that sellers may have a variety of reasons for selling, so we don’t know for sure what they are thinking about the stock price. That single sale was only 5.5% of David Beffa-Negrini’s investment.
In the last year PC Connection insiders did not buy any company shares. The chart below shows insider transactions (of 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!
I will like PC Connection better if I see big internal purchases. While we wait, check this out free a list of growing companies with significant, recent, insider buying.
Computer Connect Sells The Stock
The last three months have seen significant internal selling at PC Connection. Specifically, Independent Director Jack Ferguson disposed of $185,000 worth of stock at that time, and we recorded no purchases. Overall this makes us a bit cautious, but it’s not the be all and end all.
Does PC Connection Boast High Internal Ownership?
Looking at the total insider shares in a company can help inform your opinion of whether they are well aligned with common shareholders. I think it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that PC Connection insiders own 30% of the company, worth about $408 million. This type of significant insider ownership generally increases the chance that the company is being managed in the interest of all shareholders.
So What Does This Data Suggest About Computer Connection Insiders?
An insider sold shares recently, but they didn’t buy. And even if we look at the last year, we didn’t see purchases. But since PC Connection is profitable and growing, we are not too worried about it. While insiders own a lot of stock in the company (which is good), our analysis of their transactions does not make us feel confident about the company. So while it is useful to know what insiders are doing in terms of buying or selling, it is also useful to know the risks that a particular company faces. Doing our analysis, we found that PC Connection has 2 warning signs and it would be unwise to ignore them.
Of course PC Connection may not be the best stock to buy. So you might want to see this free a 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 placements, but not derivative transactions.
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