We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we’ll take a look at whether insiders have been buying or selling shares in TransDigm Group Incorporated (NYSE:TDG).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At TransDigm Group
In the last twelve months, the biggest single purchase by an insider was when James Skulina bought US$1.6m worth of shares at a price of US$246 per share. Even though the purchase was made at a significantly lower price, we still think insider buying is a positive. The insider buying may not tell us much about how insiders feel about the current share price.
Over the last year, we can see that insiders have bought 7.77k shares worth US$2.0m. In the last twelve months there was more buying than selling by TransDigm Group insiders. The average buy price was around US$253. We don’t deny that it is nice to see insiders buying stock in the company. However, you should keep in mind that they bought when the share price was meaningfully below today’s levels. You can see a visual depiction of insider transactions over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does TransDigm Group 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. We usually like to see fairly high levels of insider ownership. TransDigm Group insiders own 0.9% of the company, currently worth about US$162m based on the recent share price. 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 Do The TransDigm Group Insider Transactions Indicate?
The fact that there have been no TransDigm Group insider transactions recently certainly doesn’t bother us. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like TransDigm Group insiders think the business has merit. Of course, the future is what matters most. So if you are interested in TransDigm Group, you should check out this free report on analyst forecasts for the company.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.