Merck Insider Boosts Stake by 1,500%: A Bullish Signal for Investors

Merck & Co., Inc. (NYSE: MRK) shareholders have reason to be optimistic following the recent stock purchase by Independent Director Douglas Baker. Baker bought a whopping US$1.3 million worth of shares at a price of US$88.50, increasing his holding by a full 1,500%. This significant purchase suggests that Baker has confidence in the company's future prospects, as he believes the shares are worth buying, even at a higher price than the current stock price.



Baker's purchase is the largest by an insider individual in the last twelve months, according to our records. This indicates that an insider was happy to buy shares at above the current price of US$87.28. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months, insiders purchased 17.83k shares for US$1.6m. On the other hand, they divested 3.36k shares, for US$334k. Overall, Merck insiders were net buyers during the last year. This net purchase indicates that insiders have been bullish on the company's future. Additionally, Merck insiders own 0.05% of the company, currently worth about US$111m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, as it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Merck Insiders?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest Merck insiders are well aligned, and quite possibly think the share price is too low. Nice! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 1 warning sign with Merck and understanding this should be part of your investment process.

But note: Merck may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.