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A Closer Look At Insider Sales By Garmin's Chairman

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A Closer Look At Insider Sales By Garmin's Chairman

Garmin Ltd. (NASDAQ: GRMN) shares are up 39.6% in the past year in a fiercely competitive fitness tracker market. Yet a series of large stock sales by Garmin Chairman Min Kao have some traders wondering if they should be following Min’s lead and dumping the GPS company's stock. 

The Trades

By screening for Garmin and Form 4 on Benzinga Pro, subscribers can see that since June 28, Min has reported 136 sales of Garmin stock. Altogether, Min has sold more than 6.54 million shares of Garmin stock worth roughly $518 million in less than four months.

Why It’s Important

Company insiders often have the best sense of the health of a company and where business is headed.

The phrase “insider trading” has a negative connotation to many Americans, but it's perfectly legal assuming all trades are publicly disclosed to the Securities and Exchange Commission and are not based on specific non-public information.

Company insiders are free to buy and sell a stock as they please provided they fill out the proper paperwork in a timely manner notifying other investors of what they are doing.

Insider selling isn’t necessarily a red flag given the number of corporate executives that are paid at least in part in shares of stock.

Insider buying is typically much more noteworthy and can serve as a major vote of confidence from company management.

Stock traders are always on the lookout for unusually large insider trades or any changes in insider trading patterns.

Garmin stock was down 0.51% at $86.97 at the time of publication. 

Benzinga’s Take

At first glance, Min’s aggressive selling spree in recent months may look like a reason to cash in on Garmin stock and look at buying competitors, such as Fitbit Inc (NYSE: FIT). Even StockTwits users have picked up on Min’s dumping.

Min’s sales may not be as bearish as they seem for two reasons. 

First, Min has been aggressively selling shares of Garmin off and on going back to March 2018, and it hasn’t been bad news for the share price up to this point. In fact, Garmin’s 45% gain since late March 2018 is more than four times the overall gain of the S&P 500 in the same period. 

Second, even after selling 6.5 million shares of stock, Min still owns 13.7 million shares. While the chairman reducing his holdings by roughly a third is certainly a noteworthy headline for investors, Min still owns more than $1 billion in Garmin stock and has plenty of skin in the game at this point.

Traders shouldn’t necessarily consider Min’s selling a red flag. But it’s probably enough to keep a close eye on the stock in coming weeks and months, especially if his selling continues or accelerates.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Vanity Fair Author: Suspiciously Profitable China Trades May Not Be 'On The Level'

Insider Buying Vs. Insider Selling: What Numbers Really Matter For Traders?

Photo courtesy of Garmin. 

 

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