Cummins Insiders Sell US$1.8m Of Stock, Possibly Signalling Caution

Over the past year, many Cummins Inc. (NYSE:CMI) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At Cummins

In the last twelve months, the biggest single sale by an insider was when the Independent Director, Bruno V. Di Leo, sold US$1.8m worth of shares at a price of US$359 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The good news is that this large sale was at well above current price of US$293. So it is hard to draw any strong conclusion from it.

In the last twelve months insiders purchased 2.03k shares for US$580k. But they sold 5.02k shares for US$1.8m. Over the last year we saw more insider selling of Cummins shares, than buying. You can see a visual depiction of insider transactions (by companies and 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!

Check out our latest analysis for Cummins

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Does Cummins Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Cummins insiders own 0.5% of the company, worth about US$194m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The Cummins Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Cummins shares in the last quarter. It's great to see high levels of insider ownership, but looking back over the last year, we don't gain confidence from the Cummins insiders selling. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To that end, you should learn about the 4 warning signs we've spotted with Cummins (including 2 which are a bit concerning).

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For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.