Insiders sold US$21m worth of Broadcom Inc. (NASDAQ:AVGO) stock last year, could be a warning sign to watch out for

While Broadcom Inc. (NASDAQ:AVGO) shareholders have enjoyed a good week with stock up 8.1%, they need remain vigilant. Although prices were relatively low, insiders chose to sell US$21m worth of stock in the past 12 months. This could be a sign of impending weakness.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Broadcom

Broadcom Insider Transactions Over The Last Year

The insider, Thomas Krause, made the biggest insider sale in the last 12 months. That single transaction was for US$8.1m worth of shares at a price of US$586 each. That means that even when the share price was below the current price of US$633, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was 100% of Thomas Krause's holding.

All up, insiders sold more shares in Broadcom than they bought, over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insiders At Broadcom Have Sold Stock Recently

The last three months saw significant insider selling at Broadcom. Specifically, insiders ditched US$886k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Does Broadcom Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Broadcom insiders own 1.5% of the company, worth about US$3.9b. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Broadcom Insiders?

Insiders haven't bought Broadcom stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn't bring confidence, either. On the plus side, Broadcom makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Broadcom. For example - Broadcom has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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