There can be dozens of reasons that an insider would sell shares of a public company they run. Maybe they need to diversify, pay taxes, buy a second or third home, change their financial management plans and so on. But for an insider to make a big purchase of stock, it means that the insider thinks the stock is about to rise or is undervalued.
A big insider purchase was just seen in shares of Ford Motor Co. (NYSE: F). William Clay Ford Jr., Ford’s board chair, just spent $7.995 million to purchase some 840,962 common shares. The transaction was on August 1, 2019, at an average price of $9.51 per share.
William Clay Ford Jr. is now shown to own 1,100,617 in direct shares of Ford, and he still holds an indirect ownership of some 146,096 additional shares.
While a transaction of just under $8 million might not sound big on the surface for a founding family member, insider family members of great companies tend not to be as wealthy as their predecessors on a relative basis.
Monday’s news follows a share purchase the prior week from director John Lechleiter. He purchased 10,000 shares at $9.60 per share and now holds 65,000 common shares.
It was just back on July 24 and July 25 that Ford’s post-earnings reaction bit hard into the stock. Ford’s stock price was at the lowest level in nearly two months as hopes for a turnaround by the automaker faded. It was the stock’s worst earnings reaction in about 18 months as the impact was felt in earnings and in future guidance.
When Ford’s shares fell from $10.33 ahead of earnings to $9.56 afterward, it felt bad enough. Ford shares closed down at $9.28 last Friday, and the stock was down at $9.20 late on Monday, when the Dow was down 2.8% and the S&P 500 was down 2.9%.
There is no reason to believe that an insider buying shares means that the absolute bottom is in. After all, even the best corporate insiders are unlikely to be any better than anyone else at picking a bottom in the overall stock market. That said, those corporate insiders sure have a lot more insight into what is happening inside their own company and in their own industry than other investors.
24/7 Wall St. recently noted that both Ford and General Motors should have relative safety of their dividends when the next recession comes. That said, the insiders at Ford are almost certain to know that cutting their dividend would be a bad move. Maybe this approximately $8 million bet was a signal that they are well aware of that. Then again, that notion did not help on the last earnings call, and the notion of the economy having already faced “peak auto” has been well known for quite some time now.
Ford has a 52-week trading range of $7.41 to $10.56, and the consensus target price was last seen at $10.50.
The Big Trade War If: What If China Decides to Sell its $1.11 Trillion in US Treasuries?