We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in General Dynamics Corporation (NYSE:GD).
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
Independent Director Mark Malcolm made the biggest insider purchase in the last 12 months. That single transaction was for US$510k worth of shares at a price of US$170 each. That implies that an insider found the current price of US$184 per share to be enticing. That means they have been optimistic about the company in the past, though they may have changed their mind. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today’s share price, as the discount to value may have narrowed with the rising price. The good news for General Dynamics share holders is that insiders were buying at near the current price.
Happily, we note that in the last year insiders paid US$610k for 3600 shares. But they sold 2327 for US$398k. In the last twelve months there was more buying than selling by General Dynamics insiders. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. General Dynamics insiders own 3.6% of the company, currently worth about US$1.9b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
The fact that there have been no General Dynamics insider transactions recently certainly doesn’t bother us. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, General Dynamics insiders feel good about the company’s future.
Don Kaufman delivers what readers are calling 'HIS BEST YET!' In this exclusive Guide, Don will give you ALL the secrets he's taught millions of other traders to help guide them along in their successful options trading journey...
Now, this is NOT for those who only want to make a HALF attempt...nope...this is ONLY for those serious about becoming a better trained, more profitable, and long term options trader!
If that's YOU...Download Your Copy below: