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 before you buy or sell Illinois Tool Works Inc. (NYSE:ITW), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Illinois Tool Works
Over the last year, we can see that the biggest insider purchase was by Chairman & CEO E. Santi for US$998k worth of shares, at about US$158 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$223. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
While Illinois Tool Works insiders bought shares during the last year, they didn't sell. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Illinois Tool Works is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Illinois Tool Works
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. It's great to see that Illinois Tool Works insiders own 0.4% of the company, worth about US$259m. 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 Illinois Tool Works Tell Us?
The fact that there have been no Illinois Tool Works insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. 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. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 1 warning sign for Illinois Tool Works you should be aware of.
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.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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