See Why Earnings May Hinder Insider Trading
Benzinga has been tracking Brown-Forman's insider trading over the last couple weeks. Over time, company executives have been selling off shares. The executives' continuous selling patterns are not necessarily uncommon amongst executives, but it is interesting to understand why they do it.
This past week, Owsley Brown Frazier sold about 95,089 shares on the open market, which represents about 0.11% of all outstanding shares. It is simply one man, so he may not be a legitimate representation of the company and its own thoughts on its future direction. The most logical motive behind Frazier's continuous selling may be to prevent aberrant stock movements.
Considering that Frazier has been regularly selling multiple blocks of shares, he may simply be trying to unwind his positions in order to enjoy his wealth. After all, if your money is tied into stocks forever, you can never actually use the cash earned. Although Frazier's liquidation is at a larger scale compared to many others, his motives appear to be personal rather than malicious.
US Bancorp (NYSE: USB) is a financial institution that operates across the United States. With a market capitalization of about $54.66 billion, any insider transactions will have to be extremely significant in order to clue investors into the future. This past week, insiders bought about 1,500 shares, which represent 0.000079% of all shares traded. As expected, this does not mean very much and may simply be another case where individuals just wants extra liquidity.
The more interesting thing, however, is that there were no insider buys recorded in the past week apart from US Bancorp. One obvious reason may be the restrictions that executives face throughout the year, known as blacked out dates. Blacked out dates are periods when executives cannot conduct transactions, and exist mostly to preserve fairness in the open markets.
In the midst of an array of earnings announcements, it makes sense why executives cannot buy their own companies' shares. After all, executives typically know earnings information well in advance of the actual release. Keeping this in mind, it is interesting that US Bancorp executives were able to purchase shares. The company's earnings call was on January 18, 2012, so executives may have waited for the black out dates to expire before immediately trading the company's stock.
Insider trading can be a very helpful tool for retail traders, but as earnings is in full swing, the activity may be limited. At this time, many transactions may be conducted by individuals who are simply looking for ways to increase their own cash position for personal reasons. As such, it may help investors to wait until after a company's earnings to see how executives react when they can trade their own companies again.
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