Is American Express Company (AXP)’s Executive Selling Spree a Red Flag?

In the current era of executive compensation, a trend has developed in that more and more compensation is being “paid” in stock options and shares. Since this percentage of compensation can reach 60%, executives have to rely on the ability to sell those shares or execute options to get income. And with the company’s stock at five-year highs, now is an optimal time for executives to cash out for maximum benefit.

The importance of buying and selling
With that last detail in mind, investors should still be aware of the ownership movements for any company’s stock. But instead of focusing on the selling, consider monitoring the buying more. While an executive could sell their shares for any purpose (new car, house, college bills, etc.), those transactions don’t give much context to their underlying opinion of the business. Buying shares, on the other hand, generally has one driver: confidence in the business. If you see a great deal of insider buying, consider it a good sign that those who know the business best are sure that the stock will rise.

The article Is American Express’ Executive Selling Spree a Red Flag? originally appeared on Fool.com and is written by Jessica Alling.

Fool contributor Jessica Alling has no position in any stocks mentioned, but you can contact her here. The Motley Fool recommends American Express. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase (NYSE:JPM).

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