Does CEOs’ sell-off mean it’s time to sell?
Recently, reports about cashing out by American business leaders have stirred the nerves of investors. It has reached its peak when the CEOs of $Tesla (TSLA.US)$and $Microsoft (MSFT.US)$ started selling their stock while their company's stock prices were hovering near new records.
$Microsoft (MSFT.US)$ Chief Executive Satya Nadella sold about half of his shares in the company last week, reported by Wall Street Journal on Nov. 29.
$Microsoft (MSFT.US)$ Chief Executive Satya Nadella sold about half of his shares in the company last week, reported by Wall Street Journal on Nov. 29.
The filing of Mr. Nadella’s transaction was made public on the Wednesday before the long Thanksgiving weekend. The transaction yielded more than $285 million for Mr. Nadella. This is the single-largest stock sale for Mr. Nadella, according to InsiderScore.
How did the market react?
Interestingly, MSFT has fallen 2% since LAST Wednesday, while $S&P 500 Index (.SPX.US)$ has fallen 2.64% over the same period.
Ben Silverman, director of research at InsiderScore, said the sale is similar to Tesla CEO Elon Musk's recent stock sales. Mr. Musk took to Twitter on Nov. 7 pledging to sell 10% of his stockholdings. The Tesla CEO was taking advantage of gains in the company’s stock price, Mr. Silverman said.
$Tesla (TSLA.US)$'s stock price has fallen by about 7%, and its market value has shrunk by nearly $100 billion from that point.
Does CEOs’ sell-off mean it’s time to sell?
Action speaks louder than words. Of course, the behavior of business leaders will affect investors' confidence in the company. At least, for better or worse, news usually makes stocks more volatile in the short term.
However, their actions are not always noteworthy.
For one thing, insiders may have their own reason each time they sell stock. As to Nadella, analysts said the move could be related to Washington state instituting a 7% tax for long-term capital gains beginning at the start of next year for anything exceeding $250,000 a year.
For another, insider trading shouldn't be the only source of information, because not every executive is correct each time. In the long run, the best option is to research in-depth.
News about the sale of stocks by executives is reported from time to time. To paint a clearer picture of their effects, let's check the performance of markets and those stocks:
1. The broad market has continuously set new highs since the pandemic.
2. Taking Amazon as an example, after the CEO sold shares, the stock price has still climbed higher.
The same story also applies to $Pfizer (PFE.US)$, whose CEO sold stocks last November.
3. It's not all good news. $GameStop (GME.US)$ CEO announced to sell stocks in April. Here is how the stock price performed since then.
The bottom line
1. The CEO's sell-off may help you predict the future volatility of stock prices in the short term.
2. There is no obvious correlation between long-term stock performance and CEO selling.
3. Insider trading should not be the only source of information. Before making wise investment decisions, we should rely on in-depth research to check the company’s financial statements, annual reports, and other public opinions.
As a rule, value investors generally prefer to invest in high-quality companies with fair prices. The question is, how to identify the value of a company?
Click to our newly unveiled courses: How to invest in stocks: Quick-Start Guide.
Welcome to Courses in Moo Community, we help you trade like a pro.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
Moomoo Learn Official Account
Easy learning at moomoo Learn.
Let's trade smarter！
28KFollowers
105Following
28KVisitors
Follow
Johnnie Worker : Normally it’s nothing to worry about, but look at the crazy PE and positive sentiments! It’s time to let it go baby!
darikus : Investigate
邱秋球 : 01 Dec 2021 | Powell unexpectedly turned hawkish, leading to a decline in US stocks, and a short-term rebound in Hong Kong stocks is expected to be blocked by 24000 $TENCENT (00700.HK)$ $Tesla (TSLA.US)$ $Apple (AAPL.US)$ $Alphabet-A (GOOGL.US)$
71791573 : The reason for them selling is the most important. We know Elon sold to take care of tax obligations. if an insider sales for a negative reason then yes it's time to sell. These are not the only to reasons insiders sell stocks but just a couple quick examples.
HoSeyLiao48 : yes
Tiggerpepper : No, because our time is different
James Kiet Kiet : CEOs aren't the only companies that sell shares anymore. However, the shareholding remains unchanged at 3.
Ah Boo : If the CEO don even have confidence in his company, how about us
Louis Jia Heng : Sell off to buy options????
DCFDTL : you should
just look at $Robinhood (HOOD.US)$
absolute garbage of a stock and company
View more comments...