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We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell General Dynamics Corporation (NYSE:GD), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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.’
The Last 12 Months Of Insider Transactions At General Dynamics
Over the last year, we can see that the biggest insider purchase was by Independent Director Mark Malcolm for US$510k worth of shares, at about US$170 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being US$168). 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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months insiders purchased 3600 shares for US$610k. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
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 General Dynamics insiders own 3.5% of the company, worth about US$1.7b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At General Dynamics Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like General Dynamics insiders think the business has merit. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for General Dynamics.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.