If several officers and directors decided to sell their stock in their own company at the same time, you’d like to know about it, wouldn’t you?
What if you owned that stock? Now the very people who are making decisions, have the best information about the company, and can tell what might make the company boom or bust are selling it—HARD.
And we’re not talking chump change. We’re talking millions of dollars. What does that say about the state of that company?
That exact situation is happening right now with this services sector company:
CarMax Inc. (KMX) is US retailer of used vehicles with some serious insider transactions. In the past week or so, 9 company officers and directors have sold 840,719 shares in the company.
And with the price at approximately $52 per share, that’s an estimated value of $42.4 million.
That’s an incredible amount of selling going on. The great thing is that I caught it early, and that you now know about it early. Now we have a chance to dig deeper into KMX and figure out how to deal with it.
Although the annual data shows that KMX has had an increasing gross profit each year since 2012, the quarterly data doesn’t paint the same picture. In fact, it’s the opposite. Until the most recent one, each quarter has seen a steady decrease in gross profit since May of 2013.
Now let’s look at the daily chart for KMX from Stockcharts.com.
That could be the reason for so much heavy selling. Do you see the big jump the price of KMX made in June? It went from about $45 to $53. Then a few weeks later, insiders are dumping the stock.
I believe that insiders may have waited for the jump, expect the price to soon fall, and are now getting out while they can before the price falls again. In any case, the huge amount of insider selling gives us a great reason to keep an eye on KMX.
Now we just have to look at how KMX moves in the next few weeks. Keep in mind that the key to profiting from any stock is to understand WHEN to buy or sell, which is what you can learn to do in our Stock Code Breaker course.
