Insiders Are Selling These Stocks, But You Shouldn’t

Key Points

• Insiders are selling Altair Engineering but the stock is on track to reach record highs. 
• HCA Healthcare insiders sell despite firming sentiment among analysts. 
• JBL is an industry leader supported by demand in all verticals. 

Insider sales are an excellent way to find stocks to short or signals to take profits, but they aren’t always the indicator they could be. While insiders are best positioned to know the company’s health, selling stock does not guarantee future performance. In some cases, insiders are paid with shares, and when presented with attractive selling opportunities, they take money off the table like any investor. In these cases, trending price action is a more-telling indication of company health, which we have today.

Three high-quality stocks trending higher on results and outlook have made the top insider sales list. However, the takeaway is that Altair Engineering NASDAQ: ALTR, HCA Healthcare NYSE: HCA and JBL NASDAQ: JBL are more likely to continue trending higher than not. 

Altair Engineering Reaches 16-Month High

Altair Engineering insiders have been selling in droves, but this is not a red flag for investors. The insiders own a whopping 22% of this company, whose stock is reaching 16-month highs, and selling is broad-based and small relative to the total holdings. This activity is consistent with share-based compensation, as it is with all of these stocks.

Altair Engineering is a cloud-based software company focused on simulation, the Internet of Things, high performance and AI. Its operating segments include Software and Services geared toward helping clients optimize network performance. The company recently returned to growth following the pandemic bubble and is expected to continue growing on a YOY basis through the end of the year due to the trend in AI. AI is expected to grow at a 38% CAGR for the next 7 years, with most of that growth in services like Altair Engineering. 

The institutions and analysts are bullish on this stock. The institutions own about 62% of the company and have bought the stock over the past year. The analysts rate it a Moderate Buy with a price target about 10% above the current action. The price target is down compared to last year but firmed over the last quarter. The recently reported quarter outperformed the consensus but came with weak guidance that is viewed as cautious. 

HCA Healthcare For Large-Cap Growth 

HCA Healthcare is a large cap operator in the health services industry, operating a network of acute care and outpatient facilities across the U.S. It doesn’t have the high level of insider ownership that comes with Altair Engineering, but they are selling as actively. HCA Healthcare insiders, including the CEO, CFO, COO, EVP and an SVP, are selling the stock, but once again, this is not the red flag it could be. The stock is trending higher and breaking out to new highs, driven by a history of steady business growth and an outlook for the same. The stock is also a reliable dividend payer with a robust outlook for distribution growth. The yield isn’t much, about 0.9%, but the payout ratio is below 15% and backed up by a sound balance sheet. 

Institutions and analysts are buying this stock. The institutions own about 65% of the shares and have been buyers on balance for the 5 of the last 6 quarters. The analysts rate the stock a Moderate Buy with a target that assumes fair value at current levels but is trending higher. The most recent activity has the stock above its current level and at a new high. 

JBL Is Fundamental To Manufacturing 

JBL insiders are selling, but no one else is. This company is fundamental to the manufacturing and tech industries and is highly demanded by institutions, analysts and investors. The institutions own about 88% of the stock and growing while the analyst rate it a Buy with about 10% of upside ahead. That puts the stock well into the all-time high territory. Raymond James analysts recently called the stock out as 1 of their top 20 pair trades, citing valuation relative to peers.