It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Ducommun Incorporated (NYSE:DCO), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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. 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.
Ducommun Insider Transactions Over The Last Year
The Director, Robert Ducommun, made the biggest insider sale in the last 12 months. That single transaction was for US$216k worth of shares at a price of US$43.19 each. So we know that an insider sold shares at around the present share price of US$39.50. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
We note that in the last year insiders divested 14876 shares for a total of US$655k. Insiders in Ducommun didn't buy any shares in the last year. 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!
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).
Ducommun Insiders Are Selling The Stock
The last three months saw significant insider selling at Ducommun. In total, insiders dumped US$173k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does Ducommun Boast High Insider Ownership?
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Ducommun insiders own about US$36m worth of shares. That equates to 7.9% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Ducommun Tell Us?
Insiders haven't bought Ducommun stock in the last three months, but there was some selling. And even if we look to the last year, we didn't see any purchases. But since Ducommun is profitable and growing, we're not too worried by this. While insiders do own shares, they don't own a heap, and they have been selling. We'd think twice before buying! 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 Ducommun 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.
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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.