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We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Graco Inc. (NYSE:GGG).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Graco
Over the last year, we can see that the biggest insider sale was by the , Jeffrey Johnson, for US$733k worth of shares, at about US$48.85 per share. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of US$49.10. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower 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. It is worth noting that this sale was only 34.1% of Jeffrey Johnson’s holding.
We note that in the last year insiders divested 30897 shares for a total of US$1.5m. Insiders in Graco didn’t buy any shares in the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Graco better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Graco Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Graco. In total, Jeffrey Johnson dumped US$733k worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.2% of Graco shares, worth about US$97m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Graco Insider Transactions Indicate?
An insider hasn’t bought Graco stock in the last three months, but there was some selling. And even if we look to the last year, we didn’t see any purchases. But since Graco is profitable and growing, we’re not too worried by this. While insiders do own shares, they don’t own a heap, and they have been selling. We’re in no rush to buy! Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Graco.
But note: Graco may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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 email@example.com. 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.