A standard rule of thumb in the financial markets is that insider buying indicates that corporate insiders believe their own companies’ shares are severely undervalued. By the same token, heavy insider selling is usually perceived as a bearish signal. However, insider selling should be interpreted with more caution. The main problem with insider selling revolves around the fact that Board members and executives sell shares for a wide variety of reasons that may not necessarily be related to the future prospects or current valuations of their companies.
All in all, investors need to keep in mind that insiders can sell shares for various reasons, not simply because they anticipate a share price drop. Insider trading watchers would also be wise to pay attention to what Phil Roth, a senior technical analyst for Miller Tabak & Co., had to say about insider trading: “It is important to remember that most insiders are investors, not traders and they tend to buy shares in the company when they are cheap and sell when they are expensive. They are not as motivated by trends as are traders. Insider transactions have proven to be a better buy than sell indicator in my experience…”
That being said, let’s have a look at a set of noteworthy insider transactions reported with the SEC on Wednesday.
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Board Member at Struggling In-Flight Connectivity Provider Buys More Shares
Let’s kick off our discussion by looking into the recent insider buying observed at Gogo Inc. (NASDAQ:GOGO). Board member Charles C. Townsend acquired 300,000 shares on Monday at prices varying from $9.60 to $9.76 per share, all of which are held by the Charles C. Townsend III Trust. After the somewhat sizable purchase mentioned above, Mr. Townsend holds an indirect ownership stake of 654,267 shares through the aforementioned trust fund.
The provider of in-flight connectivity and wireless in-cabin digital entertainment solutions has seen the value of its shares plummet by 49% since the start of the year. Revenue earned through Delta Air Lines Inc. (NYSE:DAL) and American Airlines Group Inc. (NASDAQ:AAL) accounted for half of Gogo Inc. (NASDAQ:GOGO)’s revenue for the three months ended September 30. The high reliance on these two customers can be viewed as a source of great concern for investors. In early-June, Gogo told investors that around 550 of American Airlines’ planes with its equipment installed were “subject to deinstallation at any time at American’s option.” More importantly, Gogo said that it anticipated American Airlines to exercise that right for many or even all of those aircraft “from time to time over the next several years.” Matthew Tewksbury’s Stevens Capital Management added a 10,499-share stake in Gogo Inc. (NASDAQ:GOGO) to its portfolio during the September quarter.
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In the next two pages of this article, we’ll discuss more insider transactions reported during the day U.S. citizens selected Donald Trump as the nation’s next president.