Rarely should investors worry about insider selling, says Fool contributor Tim Beyers in the following video. Why? Because most of the time, sales reported in the headlines don't look nearly so bad once you scan the source documents, or Form 4s, filed with the SEC.
Take Rackspace Hosting (NYSE:RAX). In November, headlines blared about how CEO Lanham Napier had sold hundreds of thousands of shares when, in fact, he had sold none. What was missing? A closer look at the Form 4s, Tim says, which had been amended after an initial filing.
Rather than bailing out of his position, Napier exercised three options grants from 2009 that were set to expire at the end of 2015. He then sold at about $42 a share. Napier still directly controls more than 880,000 shares of Rackspace stock and is managing general partner for HBSA, which owns more than 3.6 million shares of Rackspace stock as of this writing. He has as much to gain (or lose) as common shareholders, which is what you should want as an investor and part-owner.
Unsure whether the CEO of a stock you own is aligned with your interests? Check the Form 4s and report what you find in the comments box below. Or you can list a ticker and ask Tim to take a look. He'll be talking more about insider buying and selling in the weeks to come.
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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Rackspace Hosting at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
The Motley Fool recommends Rackspace Hosting. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.