We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell TransDigm Group Incorporated (NYSE:TDG), 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 equally, we would consider it foolish to ignore insider transactions altogether. 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’.
The Last 12 Months Of Insider Transactions At TransDigm Group
Over the last year, we can see that the biggest insider sale was by the Independent Director, Mervin Dunn, for US$3.9m worth of shares, at about US$432 per share. That means that even when the share price was below the current price of US$647, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it’s only a weak signal. This single sale was 89% of Mervin Dunn’s stake. Mervin Dunn was the only individual insider to sell shares in the last twelve months.
In the last twelve months insiders purchased 533.00 shares for US$303k. But they sold 18544 for US$8.0m. Mervin Dunn sold a total of 18544 shares over the year at an average price of US$434. 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 that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
TransDigm Group Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at TransDigm Group. Specifically, General Counsel Halle Terrion bought US$299k worth of shares in that time, and we didn’t record any sales whatsoever. This makes one think the business has some good points.
Insider Ownership of TransDigm Group
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. We usually like to see fairly high levels of insider ownership. It’s great to see that TransDigm Group insiders own 0.9% of the company, worth about US$308m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About TransDigm Group Insiders?
It’s certainly positive to see the recent insider purchase. On the other hand the transaction history, over the last year, isn’t so positive. The recent buying by an insider , along with high insider ownership, suggest that TransDigm Group insiders are fairly aligned, and optimistic. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: TransDigm Group 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.
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.
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