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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. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Illinois Tool Works Inc. (NYSE:ITW).
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, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At Illinois Tool Works
Over the last year, we can see that the biggest insider purchase was by Independent Director Richard Lenny for US$250k worth of shares, at about US$141 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being US$140). It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. To us, it’s very important to consider the price insiders pay for shares is very important. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Richard Lenny was the only individual insider to buy shares in the last twelve months.
The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
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).
Does Illinois Tool Works Boast High 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Illinois Tool Works insiders own about US$450m worth of shares (which is 1.0% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Illinois Tool Works Tell Us?
The fact that there have been no Illinois Tool Works insider transactions recently certainly doesn’t bother us. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Illinois Tool Works insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Illinois Tool Works.
Of course Illinois Tool Works may not be the best stock to buy. So you may wish to see this free collection of high quality 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 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.