It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Electric Company (NYSE:GE).
What Is Insider Selling?
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
General Electric Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Chairman & CEO H. Culp for US$2.5m worth of shares, at about US$13.04 per share. That means that an insider was happy to buy shares at above the current price. 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. It’s not at all bad to see insiders buy shares at or above current prices.
In the last twelve months insiders paid US$5.3m for 486.00k shares purchased. In total, General Electric insiders bought more than they sold over the last year. They paid about US$10.85 on average. I’d consider this a positive as it suggests insiders see value at around the current price, which is US$9.90. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of General Electric
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. 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 General Electric insiders own 0.1% of the company, worth about US$116m. 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 Electric Tell Us?
It doesn’t really mean much that no insider has traded General Electric shares in the last quarter. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, General Electric insiders feel good about the company’s future. Of course, the future is what matters most. So if you are interested in General Electric, you should check out this free report on analyst forecasts for the company.
Of course General Electric may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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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.