The fact that an insider divests themselves of shares of a stock does not normally cause me to react hastily by selling or buying that stock. Insiders have a better seat for viewing where the company is headed and they may want to sell for some very good and legitimate reasons. I am actually more interested when I see insider buying going on. It is more likely to attract me to buy and/or add to my position and less concerned when I see some selling of shares.
It has recently been reported that Bill Gates is selling an additional 90 million shares of Microsoft (MSFT, Financial), divesting himself of 22% of his holdings in just the last two years, 13% in the last twelve months. The picture of insider trading at Microsoft is not positive:
While many value investors shun technology stocks, times have certainly changed and there are indications that value investors are currently holding Microsoft in large numbers, along with Hewlett Packard, Intel and other technology stocks that are undervalued and flush with cash. Microsoft is currently selling at $28.28. I have a fair value of $45, offering a margin of safety of approximately 37%.
In a time in which the market is going ever higher, one would expect positive moves coming from company executives, so the selling of the large number of shares by Bill Gates is troublesome or at least cause for concern. Apparently he has lots of company. Google, Qualcomm, JDS Uniphase, Broadcom, Hewlett Packard and many others, have also recently experienced considerable selling by insiders.
It was also recently reported that total insider selling totals more than 114 times insider buying and the pattern is for that trend to continue. In all fairness, some of the selling off was planned. It is not uncommon for owners to take profits and with the recent market surge you might expect it, but Microsoft hasn’t had much to take recently. The annual return for the last five years is approximately 3%. Perhaps the tax breaks are causing some of this selling. Also, Bill Gates is also not alone at Microsoft. Selling has also been going on by others at Microsoft in the early part of this year alone:
2011
Source: GuruFocus
There are numerous reasons an investor could be interested in Microsoft. The metrics are outstanding, the dividend has been established and growing, the earnings are growing, they are flush with cash. The list goes on. The fact that Bill Gates is divesting himself in such large numbers leads me to question what’s ahead for the company. Certainly, no owner ever sold stock because he thought it was going up, so there is obviously another answer and Bill Gates has not really been forthcoming. Actions speak loudly in this case.
I will disclose that I have been long on Microsoft, but intend to join the ranks of Gates and other members of the company by selling. I’d rather place my money in a better investment, where the owners are more shareholder friendly and the outlook is more positive.
It has recently been reported that Bill Gates is selling an additional 90 million shares of Microsoft (MSFT, Financial), divesting himself of 22% of his holdings in just the last two years, 13% in the last twelve months. The picture of insider trading at Microsoft is not positive:
Insider Trades | ||
3 months | 12 months | |
Number of Trades | 50 | 155 |
Buys | 7 | 32 |
Sells | 43 | 123 |
While many value investors shun technology stocks, times have certainly changed and there are indications that value investors are currently holding Microsoft in large numbers, along with Hewlett Packard, Intel and other technology stocks that are undervalued and flush with cash. Microsoft is currently selling at $28.28. I have a fair value of $45, offering a margin of safety of approximately 37%.
In a time in which the market is going ever higher, one would expect positive moves coming from company executives, so the selling of the large number of shares by Bill Gates is troublesome or at least cause for concern. Apparently he has lots of company. Google, Qualcomm, JDS Uniphase, Broadcom, Hewlett Packard and many others, have also recently experienced considerable selling by insiders.
It was also recently reported that total insider selling totals more than 114 times insider buying and the pattern is for that trend to continue. In all fairness, some of the selling off was planned. It is not uncommon for owners to take profits and with the recent market surge you might expect it, but Microsoft hasn’t had much to take recently. The annual return for the last five years is approximately 3%. Perhaps the tax breaks are causing some of this selling. Also, Bill Gates is also not alone at Microsoft. Selling has also been going on by others at Microsoft in the early part of this year alone:
2011
Bill Gates | 10000000 |
Craig Mundie | 496074 |
Lisa Brummel | 40661 |
Steven Sinofsky | 133332 |
Kurt DelBene | 34920 |
Source: GuruFocus
There are numerous reasons an investor could be interested in Microsoft. The metrics are outstanding, the dividend has been established and growing, the earnings are growing, they are flush with cash. The list goes on. The fact that Bill Gates is divesting himself in such large numbers leads me to question what’s ahead for the company. Certainly, no owner ever sold stock because he thought it was going up, so there is obviously another answer and Bill Gates has not really been forthcoming. Actions speak loudly in this case.
I will disclose that I have been long on Microsoft, but intend to join the ranks of Gates and other members of the company by selling. I’d rather place my money in a better investment, where the owners are more shareholder friendly and the outlook is more positive.
