Many Merck & Co., Inc. (NYSE:MRK) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. 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 we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

The Last 12 Months Of Insider Transactions At Merck

Over the last year, we can see that the biggest insider sale was by the Executive VP & President of Merck Animal Health, Richard DeLuca, for US$4.6m worth of shares, at about US$105 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$110. 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. It is worth noting that this sale was only 28% of Richard DeLuca's holding.

In the last year Merck 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!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insider Ownership Of Merck

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Merck insiders own 0.07% of the company, worth about US$188m. 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 Do The Merck Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Merck 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 Merck 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. While conducting our analysis, we found that Merck has 1 warning sign and it would be unwise to ignore this.

Of course Merck 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.