While Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) shareholders have had a good week with the stock up 11%, they shouldn't let their guards down. Although prices were relatively low, insiders chose to sell US$6.3m worth of stock in the past 12 months. This could be a sign of impending weakness.

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.

The Last 12 Months Of Insider Transactions At Ligand Pharmaceuticals

Over the last year, we can see that the biggest insider sale was by the insider, Matthew Korenberg, for US$2.0m worth of shares, at about US$106 per share. That means that an insider was selling shares at slightly below the current price (US$124). 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. 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 28% of Matthew Korenberg's holding.

Over the last year we saw more insider selling of Ligand Pharmaceuticals shares, than buying. 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 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).

Ligand Pharmaceuticals Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Ligand Pharmaceuticals shares. In total, insiders dumped US$267k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does Ligand Pharmaceuticals Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Insiders own 2.0% of Ligand Pharmaceuticals shares, worth about US$44m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Ligand Pharmaceuticals Tell Us?

Insiders sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. But since Ligand Pharmaceuticals is profitable and growing, we're not too worried by this. While insiders do own shares, they don't own a heap, and they have been selling. So we'd only buy after careful consideration. 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. At Simply Wall St, we found 3 warning signs for Ligand Pharmaceuticals that deserve your attention before buying any shares.

Of course Ligand Pharmaceuticals 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.