Advanced Micro Devices (NASDAQ:AMD) is having a great year in the markets with AMD stock up 64% year to date through September 10. As a result, AMD bulls are probably calling for $40.
However, if AMD insider buying, or the lack thereof, is a sign of a coming correction, you might want to reconsider buying above $30. Here’s why.
Insider Selling Far Greater
A quick look at insider buying and selling of Advanced Micro Devices stock shows that there have been no insider buys on the open market over the past three and 12 months.
Meanwhile, there have been 18 sells over the past three months for a total of 1.66 million shares. Over the past 12 months, there have been 55 sells on the open market for a total of 39.04 million shares.
There are many reasons why insiders sell a stock. There’s only one reason they buy, because it’s cheap.
The fact that insiders haven’t bought one share of AMD stock on the open market should scare you, especially when you compare it to the insider buying and selling at its peers.
Insider Buying and Selling – Past 12 Months
|Company||# of Buys||# of Sells||
I suppose you could argue that because the AMD stock price is the cheapest of the three stocks by dollar value, an insider would have to sell more shares to obtain the same amount of cash from a sale.
However, if we use the midpoint between the three stocks’ highs and lows over the past 52 weeks, you’ll see that AMD insiders sold a lot more stock by dollar value.
AMD midpoint = $25.86 * 39.04 million shares = $1.0 billion
Intel midpoint = $50.98 * 491,317 shares = $25.0 million
Nvidia midpoint = $208.61 * 2.27 million shares = $472.9 million
Nvidia Insiders Did a Lot of Buying
The most interesting observation from the above data is that Nvidia insiders didn’t sell nearly as much stock over the past 12 months as AMD insiders did when you factor in the buying.
Based on Nvidia’s midpoint for both buying and selling, Nvidia insiders on a net basis only sold $130.3 million of its stock; Intel insiders sold $23.4 million of its stock on a net basis and AMD insiders sold a whopping $1 billion.
Any way you slice it, AMD insiders have been cashing in on their stock’s massive gains in 2019.
But why no buying on the open market? Surely, if AMD stock is worth $40, insiders would be buying?
Northland Securities analyst Gus Richard has an outperform rating on AMD and a 12-month price target of $36.
Of the 37 analysts covering AMD stock, only 13 have an overweight or buy rating with four either rating it underweight or sell. The vast majority (20) rate it a hold.
As for a target price, the high is $44, the low is $8, and the average is $32.63.
Perhaps that’s why insiders are doing zero buying and lots of selling.
Should You Buy AMD Stock?
If you believe that insider buying is a sign that a stock is selling below its intrinsic value, as I do, you can’t possibly think AMD is a value above $30.
Without any new catalysts on the horizon, you might want to wait until it’s trading closer to its midpoint around $25.
The insiders probably will.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.