In the last year, many BorgWarner Inc. (NYSE:BWA) insiders sold a substantial stake in the company which may have sparked shareholders' attention. 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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

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.

The Last 12 Months Of Insider Transactions At BorgWarner

Over the last year, we can see that the biggest insider sale was by the President, Frederic Lissalde, for US$7.0m worth of shares, at about US$31.08 per share. That means that even when the share price was below the current price of US$35.85, an insider wanted to cash in some shares. 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. We note that the biggest single sale was only 33% of Frederic Lissalde's holding.

In the last year BorgWarner insiders didn't buy any company stock. 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!

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BorgWarner Insiders Are Selling The Stock

The last three months saw significant insider selling at BorgWarner. In total, insiders dumped US$850k worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Does BorgWarner Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. BorgWarner insiders own about US$64m worth of shares. That equates to 0.8% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Do The BorgWarner Insider Transactions Indicate?

Insiders haven't bought BorgWarner stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. But it is good to see that BorgWarner is growing earnings. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We'd practice some caution before buying! 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 2 warning signs with BorgWarner and understanding them should be part of your investment process.

Of course BorgWarner 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 of direct interests only, but not derivative transactions or indirect interests.

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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.