We recently reported on the companies that had the highest number of underlying put options on them among hedge funds we track. Apple Inc. (NASDAQ:AAPL) landed in fifth on that list, which could be surprising to some given the general bullish sentiment that still surrounds Apple among investors and analysts. However it’s not so when you factor in some of the many reasons a fund could have underlying put options on a company. As such, it didn’t give us a very clear picture of the situation, though we concluded that the underlying put options were mostly hedges and not bearish sentiment.
There’s another method of analysis we can use now to add an additional layer of data to our image of Apple in an effort to make it clearer, and that is insider trading activity. Studies that have shown that there is a correlation between insider trading and the short-to-medium term performance of a stock. While the correlation is higher for insider buying (which can really only indicate bullishness) versus insider selling (which could be carried out for a variety of reasons that don’t necessarily imply bearishness), both are still useful metrics to consider when trying to paint an overall picture of the prospects of a company and its shares, which is why we consider insider trading data when reporting on many of our stories.
What do we see with Apple Inc. (NASDAQ:AAPL) in terms of insider buying and selling? Well, not a lot of buying, and a lot of selling. In fact it’s been over two years now since an Apple insider made a purchase of stock, dating back to November 2012 when Walt Disney Co (NYSE:DIS) CEO and Apple Director Bob Iger purchased 1,780 shares at an average of about $563 while Apple was in the midst of a large downswing from its record high of $700 a couple of months earlier (before the company’s 7:1 stock split last summer). It was another full year prior to that to find the previous instance of insider buying, as Iger again purchased shares, 3,070 to be exact, for about $370.00.
On the other hand, insider selling activity has been quite large in recent months. Most recently, on February 18, Apple Director Andrea Jung sold 40,000 shares for $5.13 million, at $128.13 each. That was the majority of Jung’s position, leaving her with 14,595 shares. Prior to that, Senior Vice President Daniel Riccio sold his entire stake of 7,608 shares in five separate transactions between November 20, 2014, and January 23, 2015. Also in late November, Senior Vice President Craig Federighi sold off 81,543 shares in two transactions, about 25% of his Apple holdings.
At the end of October it was Senior Vice President Eduardo Cue selling off over 260,000 of his 284,000, for about $28 million. Senior Vice President and Chief Financial Officer Luca Maestri sold off his 6,116 shares earlier in October, while in September, Senior Vice Presidents Phillip Schiller and Jeffrey Williams each sold off over 340,000 shares apiece leaving them with few shares left in the latter’s case, and none left in the former’s. Even Apple CEO Tim Cook has been involved in the selling frenzy, selling over 348,000 shares in September, over 25% of his shares.
What does it all mean? Surely executives are getting and selling off stock options all the time right? Well if we look at Apple’s insider selling activity before August 2014, we see much less activity, even bearing in mind the 7:1 stock split in late June (meaning selling 10,000 shares before the split would’ve been equivalent to selling 70,000 shares today). There’s a small cluster of selling in the summer of 2013, as shares were bottoming out at the end of June, down 43% from the previous September, and another cluster in early 2012 when shares were in the midst of that meteoric rise to September. However there is little else in the way of notable selling activity over the past three years, certainly nothing on the scale of what we’ve just witnessed in the past few months.
Does the selling indicate a growing sentiment among Apple’s leadership that the time to sell is now? While there is still a lot of bullish sentiment surrounding Apple, including from famed activist investor Carl Icahn, who believes the shares will (or at least should) hit $200 some day, others feel the peak for Apple has been reached, barring a breakthrough in another industry. While there is modest hope that smartwatches could be that industry in the near-term, it’s possible the next real breakthrough won’t come for some months or years and leave Apple’s stock flopping around at or below current levels; though having left many satisfied investors and executives in its wake.
Disclosure: None
