Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of rare-earth metals miner Molycorp
So what: As my fellow Fool Travis Hoium covered today, after the close of trading yesterday Molycorp gave investors some distressing news to chew on. While the sale of $200 million of convertible notes may not be particularly worrisome, the fact that insiders are lining up to unload as much as 11.5 million shares of stock may be.
Now what: The way I tend to think about insider transactions is this: There are plenty of reasons for insiders to sell, but only one reason for them to buy. Insiders that are selling may think the stock is pricey, but they may also just want to diversify or buy a new house. However, insiders typically only buy when they think there's money to be made. I normally apply that sentiment primarily to isolated instances of selling though -- not a bunch of insiders lining up to sell all at once.
The sell-off today could be a little overblown since the bulk of the shares being sold are coming from private equity companies. It would be unusual for a PE fund to stick around forever -- they need to cash in on their investments so they can show returns to their investors. Of course, they're still going to try to pick the most opportune time to sell, so it may still say something about Molycorp's valuation.
Want to keep up to date on Molycorp? Add it to your watchlist.
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. Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.