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 Northrop Grumman Corporation (NYSE:NOC).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
Northrop Grumman Insider Transactions Over The Last Year
The insider, David Perry, made the biggest insider sale in the last 12 months. That single transaction was for US$1.7m worth of shares at a price of US$300 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$369. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 43% of David Perry's holding.
In the last year Northrop Grumman insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does Northrop Grumman 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Northrop Grumman insiders own 0.2% of the company, currently worth about US$132m based on the recent share price. 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 Northrop Grumman Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Northrop Grumman insider transactions don't fill us with confidence. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Case in point: We've spotted 3 warning signs for Northrop Grumman you should be aware of, and 1 of them can't be ignored.
But note: Northrop Grumman 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 currently account for open market transactions and private dispositions, but not derivative transactions.
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