We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Cummins Inc. (NYSE:CMI), 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, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. 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 Cummins
Over the last year, we can see that the biggest insider sale was by Lead Director Alexis Herman for US$111k worth of shares, at about US$144 per share. That means that an insider was selling shares at slightly below the current price (US$147). While sellers have a variety of reasons for selling, this isn’t particularly great to see. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was only 2.5% of Alexis Herman’s holding.
In the last twelve months insiders netted US$302k for 2.11k shares sold. All up, insiders sold more shares in Cummins than they bought, over the last year. The sellers received a price of around US$144, on average. We don’t gain much confidence from insider selling near the recent share price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Cummins Have Sold Stock Recently
The last three months saw significant insider selling at Cummins. In total, insiders sold US$199k 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 Cummins Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 0.3% of Cummins shares, worth about US$68m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Cummins Tell Us?
Insiders haven’t bought Cummins 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. While insiders do own shares, they don’t own a heap, and they have been selling. So we’d only buy after careful consideration. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Cummins.
Of course Cummins may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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 firstname.lastname@example.org.