It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in CIT Group Inc. (NYSE:CIT).
What Is Insider Selling?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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.
CIT Group Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairwoman & CEO Ellen Alemany bought US$501k worth of shares at a price of US$43.55 per share. That means that even when the share price was higher than US$43.10 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
In the last twelve months insiders purchased 34430 shares for US$1.5m. But insiders sold 12724 shares worth US$627k. Overall, CIT Group insiders were net buyers last year. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
CIT Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
CIT Group Insiders Bought Stock Recently
At CIT Group,over the last quarter, we have observed quite a lot more insider buying than insider selling. Insiders spent US$1.5m on shares. But we did see insider Jeffrey Lytle sell shares worth US$75k. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
Does CIT Group Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. CIT Group insiders own about US$27m worth of shares. That equates to 0.7% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At CIT Group Tell Us?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest CIT Group insiders are well aligned, and that they may think the share price is too low. 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.
Of course CIT Group 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.
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 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. Thank you for reading.