Trade Alert: Independent Director Of Cummins Bruno V. Di Leo Has Sold Stock

We wouldn't blame Cummins Inc. (NYSE:CMI) shareholders if they were a little worried about the fact that Bruno V. Di Leo, the Independent Director recently netted about US$1.8m selling shares at an average price of US$359. That diminished their holding by a very significant 52%, which arguably implies a strong desire to reallocate capital.

See our latest analysis for Cummins

The Last 12 Months Of Insider Transactions At Cummins

In fact, the recent sale by Bruno V. Di Leo was the biggest sale of Cummins shares made by an insider individual in the last twelve months, according to our records. That means that an insider was selling shares at below the current price (US$364). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was 52% of Bruno V. Di Leo's holding.

Over the last year, we can see that insiders have bought 2.59k shares worth US$729k. On the other hand they divested 7.41k shares, for US$2.4m. In total, Cummins insiders sold more than they bought over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Cummins insiders own 0.4% of the company, worth about US$219m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At Cummins Tell Us?

Insiders haven't bought Cummins stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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 3 warning signs with Cummins and understanding them should be part of your investment process.

Of course Cummins may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.