Several insiders of a company selling its shares within few days of each other can never be good news for the company, regardless of whether it’s big or small. However, when the company involved is a large cap, it definitely raises several eyebrows on the Street. One such large cap that has been witnessing selling from multiple insiders in the last few days is Costco Wholesale Corporation (NASDAQ:COST).
Several officers of the $55 billion market cap retailer sold shares in the company on October 9 and October 13, at prices ranging from $128.10 per share to $130.54 per share. Let’s decipher each of these transactions in detail –
- Richard A Galanti (Executive VP & CFO) – Sold 4,065 shares at an average price of $130.54 per share on October 9. He now owns 54,096 shares directly and 7,000 shares indirectly through North Island Holdings LLC.
- Joseph P Portera (Executive VP) – Sold 4,685 shares at an average price of $130.13 per share on October 9. He now owns owns 101,917 shares directly and 12,000 shares indirectly through Portera Family Trust.
- Douglas W Schutt (Executive VP) – Sold 15,000 shares at an average price of $130.23 per share on October 9. He now owns owns 79,473 shares directly.
- Dennis R Zook (Executive VP) – Sold 7,000 shares at an average price of $128.10 per share on October 13. He now owns owns 42,175 shares directly.
Warren Buffett’s Berkshire Hathaway is one of the largest shareholders of Costco Wholesale Corporation (NASDAQ:COST), which as of June 30, 2014, owns over 4.33 million shares of the retailer. Buffett initiated a stake in Costco Wholesale Corporation (NASDAQ:COST) in 2000 by buying almost 24 million shares of the company and since then the stock has returned almost 300%. Ken Griffin’s Citadel Investment Group is also bullish on the stock, it increased its stake by 32% to over 1.38 million shares during the second quarter of this year.
For its fourth quarter ending August 31, 2014, Costco Wholesale Corporation (NASDAQ:COST) declared net sales of $34.75 billion and EPS of $1.58, compared to net sales of $31.77 billion and EPS of $1.40 for the same period, last year. The company currently trades at around 22 times its expected earnings. Analysts and brokerages are buoyant regarding the stock, the stock sporting consensus recommendation of ‘Overweight’ and an average price target of over $131. Costco recently announced its plansv to enter China by opening an online store on Alibaba Group Holding Ltd (NYSE:BABA)’s Tmall.
Though a large cap stock held by the most reputed financial institutions is generally expected to remain stable if not outperform the market, multiple insider selling can also not be taken lightly. It may not change the long term outlook for the stock, but sometimes is the best sign of turbulence the stock is expected to go through in the near future.