Selling US$2.8m worth of Mohawk Industries, Inc. (NYSE:MHK) stock at high prices would have gotten insiders a handsome reward

Mohawk Industries, Inc.’s (NYSE:MHK) stock rose 22% last week, but insiders who sold US$2.8m worth of stock over the last year are probably in a more advantageous position. Holding on to stock would have meant their investment would be worth less now than it was at the time of sale. Thus selling at an average price of US$121, which is higher than the current price, may have been the best decision.

Although we don’t think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for Mohawk Industries

The Last 12 Months Of Insider Transactions At Mohawk Industries

Over the last year, we can see that the biggest insider purchase was by President William Wellborn for US$1.4m worth of shares, at about US$136 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being US$110). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it’s very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. William Wellborn was the only individual insider to buy during the last year.

Over the last year we saw more insider selling of Mohawk Industries shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

I will like Mohawk Industries better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Mohawk Industries Insiders Are Selling The Stock

Over the last three months, we’ve seen significant insider selling at Mohawk Industries. In total, insiders dumped US$1.7m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that Mohawk Industries insiders own 18% of the company, worth about US$1.3b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Mohawk Industries Insiders?

Insiders sold stock recently, but they haven’t been buying. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. While we like knowing what’s going on with the insider’s ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. In terms of investment risks, we’ve identified 3 warning signs with Mohawk Industries and understanding them should be part of your investment process.

Of course Mohawk Industries may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.