Among the best-performing stocks today (and the year, for that matter), Palo Alto Networks (NASDAQ:PANW) has surged another 1.5% in early afternoon trading. For the year, PANW stock is now up more than 75%, providing growth investors with some rather decent returns in an otherwise uncertain time.
Indeed, seeing the price action for the broader stock market in recent days, one might assume that Palo Alto would have much more muted gains. However, shares of the cybersecurity giant continue to see robust demand as investors look for more defensive names in the technology sector.
Notably, today’s move comes despite some interesting insider selling reports. According to a Securitis and Exchange Commission (SEC) filing on Tuesday, two of the company’s executives sold more than $19 million worth of PANW stock. These sales were reported via a Rule 10b5-1 trading plan, which essentially allows insiders to sell stock over a specified period of time, at varying intervals.
Let’s dive into what investors should make of this news.
PANW Stock Continues Higher, Despite Insider Selling
It’s important for investors looking at insider selling data to note a few things. First, insider selling can matter, if trades are carried out in a surprise fashion, are extreme in size, and there are no indications as to why these trades were made or if more are coming down the pike. This is not the case here.
It’s important to focus on the fact that these sales were “effected pursuant to a Rule 10b5-1 trading plan.” These trading plans essentially allow insiders to offload a specific number of shares, spreading the trades over a period of time. Essentially, insiders know that they will be receiving the proceeds of these transactions over a longer period of time but won’t know what they will ultimately receive for these sales. Thus, this is a way for insiders to make 100% sure they’re above board with their transactions, without signaling to the market that there’s something amiss at the firm.
Insiders often want to sell stock for many reasons. Maybe they want to diversify their holdings into other stocks, bonds or alternative assets. Maybe they want another vacation home, or a boat. It’s impossible to know. But when sales are carried out in a premeditated and logical fashion, outside investors have nothing to worry about. At least, that appears to be the market’s interpretation of this news today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
