What happened
Shares of Guardant Health (NASDAQ: GH) were slipping Friday after investors noticed that one of the company's independent directors sold off some shares. The medical diagnostics provider's stock was down 9.4% as of 1:10 p.m. EDT, washing away the gains produced by the exciting second-quarter earnings report it delivered earlier this month.
So what
Ian Clark was CEO of Genentech from 2010 through 2016, and now he sits on boards of a handful of companies, including Guardant Health. On Monday, Clark sold some shares of Guardant Health at $94.05 immediately after exercising an option that allowed him to acquire them for $4.18 per share.
Image source: Getty Images.
Clark disposed of just 538 shares, netting himself just $48,350 before taxes. That's hardly enough to raise alarms, but he also sold 9,683 shares of Guardant Health on the day of the company's second-quarterearnings call just a few weeks ago.
Now what
When it comes to interpreting insider transactions, always remember that there are endless reasons to sell a stock, but just one reason to buy. Clark probably just needed the money for back-to-school shopping or some other innocuous purpose.
The reason he chose to sell significant shares of Guardant rather than of the other companies he works for looks pretty straightforward as well. Clark's also a director at Forty-Seven and Corvus Pharmaceuticals, shares of which have lost 51% and 58%, respectively, over the past year. Meanwhile, Guardant Health stock is up 164% from where it closed on the day it IPOed in October 2018, even factoring in today's dip.
While it's tempting to sell stocks that are underperforming, that's a bad idea 99% of the time. And taking profits is a less insidious motivation than today's stock flop would indicate. Unless Clark's other stock options increase in value, investors can expect more Guardant Health stock sales from this insider in the near future.
10 stocks we like better than Guardant Health
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Guardant Health wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 1, 2019
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Guardant Health. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
