Some The Gap, Inc. (NYSE:GAP) shareholders may be a little concerned to see that the Independent Director, Robert Fisher, recently sold a substantial US$13m worth of stock at a price of US$25.80 per share. However, that sale only accounted for 0.9% of their holding, so arguably it doesn't say much about their conviction.
The Last 12 Months Of Insider Transactions At Gap
In fact, the recent sale by Robert Fisher was the biggest sale of Gap shares made by an insider individual in the last twelve months, according to our records. That means that an insider was selling shares at below the current price (US$26.00). 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 0.9% of Robert Fisher's holding.
Insiders in Gap didn't buy any shares in the last year. 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 Gap
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Gap insiders own about US$4.7b worth of shares (which is 48% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Gap Insider Transactions Indicate?
Insiders sold stock recently, but they haven't been buying. And even if we look at the last year, we didn't see any purchases. But since Gap is profitable and growing, we're not too worried by this. It is good to see high insider ownership, but the insider selling leaves us cautious. While it's good to be aware of 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. In terms of investment risks, we've identified 2 warning signs with Gap and understanding them should be part of your investment process.
But note: Gap may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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 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.
