Selling by boss sign to rethink situation

Isee very few chief executives stepping up to buy their own stock this summer. But I see scads of sellers. Corporate chieftains usually talk bullishly about their companies’ prospects. But if they’re selling some of their shares, it’s worth thinking twice.

Of course, there are many reasons to sell. The biggest reason is to avoid being totally reliant on one stock. An executive may also be buying a home, getting divorced, or sending a kid to college.

But no matter how you slice it, insider selling isn’t a bullish sign. If the boss is lightening up, maybe you should take a fresh look at your position.

Here are a few transactions of note.

Amazon.com Inc.

At Amazon.com Inc. (AMZN), CEO Jeff Bezos made four sales in August, and has cashed in more than $7 billion of his company’s shares this year, according to Insider Monitor. Previously, the most he’d sold in a year was $2.8 billion.

Bezos still has a huge Amazon stake, about $169 billion at current prices. The company, delivering packages like crazy to home-bound folks in the pandemic, had a bang-up quarter and is headed for a good year.

Procter & Gamble Co.

Procter & Gamble Co. (PG) is also doing fine in the pandemic, as consumer stack up on staples such as diapers and cleaning products. CEO David S. Taylor sold close to $18 million of stock in August. He still has holdings worth about $39 million.

P&G stock is selling for about 28 times earnings, versus a 10-year median of about 21.

Microsoft Corp.

At Microsoft Corp. (MSFT), CEO Satya Nadella sold almost $19 million of shares on Sept. 1. He still owns shares worth about $286 million. Amy Hood, chief financial officer, parted with about $17 million in shares a couple of days later. She retains about $92 million worth.

Microsoft’s business is going great, with a 40 percent return on stockholders’ equity in the past four quarters. However, valuations are above normal — for example, 13 times book value (corporate net worth per share), compared to a ten-year average of about five times book.

Mastercard Inc.

Ajay Banga, the CEO of Mastercard Inc. (MA), sold about $19 million of stock in July. That was nothing new: He has been a steady seller in the past three years. The number of shares he has sold has remained fairly constant, but he has been selling at increasing prices so the dollar amounts have increased.

Mastercard shares, at about $330, currently fetch about 45 times earnings. The ten-year average for the company is near 29.

Adobe Inc.

At Adobe Inc. (ADBE), CEO Shantanu Narayen sold some shares in July and August and has sold more than $17 million worth this year. However, his pace of sales was higher in several past years.

What should we make of all this selling by top corporation executives? It’s not a reason to panic, since it makes sense for them to diversify. But it’s one piece of bearish evidence in looking at a rather pricey stock market.

Disclosure: Some of my firm’s clients own Amazon.com, Adobe and Microsoft. I don’t personally own any of them.