Valeant Pharmaceuticals Intl Inc (VRX), Summit Midstream Partners LP (SMLP), Google Inc (GOOG): 4 Significant Insider Transactions That You Should Note

This is a company that has a lot of momentum in its favor, and a lot of new exciting gadgets such as Google Glass and self-driving cars. The search engine leader, and Android operator, is growing at 25% year-over-year, and is trading at 26 times earnings.

Perhaps insiders believe its premium to the market is a bit pricey? Or, maybe these insiders are simply rewarding themselves after years of great performance? Who knows–but at this point, insiders are selling Google Inc (NASDAQ:GOOG), and retail investors continue to buy.

Low Expectations & Large Gains Spark Selling

Much like Google Inc (NASDAQ:GOOG), TD Ameritrade has seen its insiders sell with authority over the last six months, and Ricketts is just one more example. The stock has seen its valuation rise 43% over the last year, as the company has beat the low earnings expectations set forth by Wall Street.

The problem is that activity for the online brokerage continues to decline, and its commissions and transaction fees has seen very little improvements. Thus, with gains being created from weak fundamental performance, it is quite easy to see why insiders might be selling.

Final Thoughts

In my book Taking Charge With Value Investing (McGraw-Hill, 2013), I list insider and institutional activity as the single most important measure outside of fundamental performance for assessing an investment. The reason: insiders know more than you, and unless there is a planned program set in place, no logical person would sell a large number of shares just prior to a large takeover or before some other great unknown catalyst.

I like to use insider activity as an indication of the unknowns, because after all, we can assess SEC filings all day, but it does not tell us with certainty what may be lurking around the corner. My personal theory is that actions speak louder than words, and while all CEOs and directors tout all the positives for their company, activity may be more telling. Thus, use these actions to your benefit, and incorporate them as an additional tool in your shed.

The article 4 Significant Insider Transactions That You Should Note originally appeared on Fool.com.

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