In this Market Foolery podcast segment, host Chris Hill and Motley Fool Hidden Gems‘ Abi Malin take a listener query about General Motors (NYSE:GM) and broaden it: Are stock sales from in and around the C-suite a signal that we should follow suit from our own portfolios? After all, a company’s managers know more than we do about how it’s doing, right? Well, yes. But don’t jump to conclusions: There can be a lot of reasons for liquidating some shares, and not all of them are bad news for you.
A full transcript follows the video.
This video was recorded on Sept. 19, 2017.
Chris Hill: Our Twitter handle is @MarketFoolery. From @theroyalblue — that’s a much better Twitter handle than mine — a question. “General Motors executive selling off shares. The auto market is in its cycle but GM is riding high. Should this be watched or worried?” I know the question is about General Motors, but we can broaden this. I think this person gets at a very relevant question that a lot of investors have, which is, I own shares of this company, or I’m thinking about buying shares of this company, and the latest headline I’m seeing is that the CEO or some high-ranking executive at that company is selling off shares — should I be worried?
Abi Malin: I think it’s definitely something to watch. I think it’s something to consider. But I would caution anyone from using this as your sole metric for buying and selling. There are a lot of reasons that people buy and sell shares. In this case, it’s Dan Ammann, who’s the president, not CEO, of GM who’s been selling shares. He sold 32% of his shares on September 13th, but he still owns about 7.2 million of common stock in GM. So it’s down from his previous 9.6 million, but I still feel well aligned with him with that holding, even though it’s less than what he had before.
Hill: It’s not a situation like the ongoing soap opera that is Equifax, where executives are selling shares and not disclosing the fact that they have yet another data breach.
Malin: Right, yeah. I don’t feel that position change has caused enough concern in my head. But again, that’s a personal judgement call.
Hill: That’s interesting to note about the president. Knowing nothing about the executive being referred to in this question, my in-the-moment reaction was, there’s a decent chance this is an automatic plan, in the same way that —
Malin: Right, your position size has grown too big for your portfolio.
Hill: Right. I always think of Bill Gates setting on autopilot, like clockwork, I don’t know if it was once a quarter or whatever Bill Gates ended up doing with his Microsoft stock to be like, “I’m just going to set this on a schedule, and it’s going to sell off when it sells off.”
Malin: Yeah. I think in terms of not only that, but also his total comp for 2016, 45% of his comp came from stock options. He was obviously well paid, but you have to consider that people have colleges or vacations or homes or whatever they want to do. So, it’s still a lot of money.
Hill: You’re saying executives are people, too? With lives?
Malin: They are people, too. [laughs]
Hill: I think we’ll end right there. Abi Malin, thanks for being here.
Malin: Thanks for having me.
Abi Malin has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.