Michael Dell bought a few shares of Dell
Well, he's not.
Dell shares jumped 3.8% on Tuesday when that transaction came to light. According to the Form 4 SEC filing, Michael plunked down a cool $100 million for 7.37 million Dell shares on the open market. This increased his direct holdings by 3.3%, or significantly less than the premium Mr. Market put on the transaction. Include the shares held in his 401(k) plan, family trust funds, and his wife's account, and Mike grew his Dell holdings by just 2.9%.
But I get it -- a CEO and chairman buying stock in his own company on the open market is seen as a vote of confidence in the operation. I can't tell you how many times one of my articles about Netflix or Google has been met with rancorous comments about Reed Hastings or Eric Schmidt selling their shares -- those darn traitors might as well sell their kids for food, out of a van down by the river!
You clearly put too much trust in the judgment of executives and also assume way too quickly that every market move is somehow linked to secret insider information.
The truth is, even Michael Dell would get in trouble for placing such a significant trade based on some major event we don't know about yet. The existence of this transaction is pretty solid proof that the company won't make a major acquisition in the next few days, or go private as some observers have suggested, or otherwise make major changes to the business.
Dell's next earnings report falls in mid-February, so Michael is clearly not banking on a short-term jump based on blowout results -- evidence of that would probably make it into the public domain beforehand given this long lead time, and the quarter is only about halfway done anyway.
I'd suggest you sit back and take another look at Dell's fundamentals rather than jumping on relatively worthless information like Michael's purchase. We all wish we had $100 million lying around to invest on a whim, but I don't think you can tell the reasons behind the move unless you are Michael Dell's accountant. Maybe he just decided against adding a personal jet to his collection this spring.
Should Anders lend more credence to insider trades? Tell him off in the comments below.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. Google is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. Netflix is a Motley Fool Stock Advisor selection. The Fool owns shares of Google. 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. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.