By selling US$25m worth of Super Micro Computer, Inc. (NASDAQ:SMCI) stock at an average sell price of US$315 over the last year, insiders seemed to have made the most of their holdings. The company's market valuation decreased by US$5.2b after the stock price dropped 11% over the past week, but insiders were spared from painful losses.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

The Last 12 Months Of Insider Transactions At Super Micro Computer

Over the last year, we can see that the biggest insider sale was by the Founder, Charles Liang, for US$13m worth of shares, at about US$252 per share. That means that an insider was selling shares at slightly below the current price (US$698). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 0.9% of Charles Liang's holding.

All up, insiders sold more shares in Super Micro Computer than they bought, over the last year. The average sell price was around US$315. It's not too encouraging to see that insiders have sold at below the current price. Since insiders sell for many reasons, we wouldn't put too much weight on it. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

Insiders At Super Micro Computer Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Super Micro Computer. Specifically, Lead Independent Director Tally Liu ditched US$420k 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.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Super Micro Computer insiders own about US$6.0b worth of shares (which is 14% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Super Micro Computer Insiders?

An insider sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. But since Super Micro Computer 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. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Super Micro Computer. Be aware that Super Micro Computer is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

But note: Super Micro Computer 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.

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