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Insiders have been selling these ASX shares. Should you?

Insider buying is often regarded as a bullish indicator as few should know a company better than its own directors.

The idea is that if they have the confidence to buy shares, it could be a sign that things are going well and they expect them to rise.

Conversely, when directors sell shares it is often regarded as a bearish indicator as you’d be unlikely to sell shares if you felt they were about to increase in value.

With that in mind, here are three shares which have experienced notable insider selling this month:

InvoCare Limited (ASX: IVC)

According to a change of director’s interest notice, non-executive director Richard Davis offloaded 40,000 shares through an on-market trade earlier this month for an average of $12.65 per share or a total consideration of $506,000. This reduced Mr Davis’ holding by 13.5% to a total of 260,000 shares. No reason was given for the sale, but I can’t say I’m overly surprised with it. Although its shares are within sight of their 52-week low, I still feel the funeral company’s shares are overvalued given its limited growth potential. In light of this, I fear they could drift down to new lows if its performance doesn’t pick up soon.

Rhipe Ltd (ASX: RHP)

This provider of wholesale subscription software licenses has seen two directors offload a large number of shares this month through on-market trades. Michael Tierney sold 700,000 shares for a total consideration of $826,000 and Dawn Edmonds sold 1,300,000 shares for a total consideration of $1,534,000. Rather helpfully Rhipe released a statement explaining the share sales. The statement advised that the sales were made “to diversify their personal portfolio’s and to encourage liquidity and diversity in the stock.” Before adding that both directors “are committed to remaining long term shareholders in rhipe and driving its ongoing success.” I feel this is a reasonable explanation and wouldn’t read too much into things.

Whitehaven Coal Ltd (ASX: WHC)

This coal mining giant has experienced heavy insider selling this month. Change of director’s interest notices reveal that the Hon Mark Vaile, John Conde, and Paul Flynn have been selling shares through on-market trades. The Hon Mark Vaile offloaded 423,865 shares for a total consideration of $2,084,684, Mr Conde sold 60,000 shares for $309,666, and Mr Flynn sold 668,875 shares for a total of $3,327,941. The latter explained that his sale was made “to predominantly fund tax liabilities arising from participation in the Company’s Equity Incentive Plan.” Last week Credit Suisse warned investors not to believe the coal price hype. I think this could make it worth considering following the lead of these directors and selling shares.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare Limited. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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