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We often see insiders buying up shares in companies that perform well over the long term. 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?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
TransDigm Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Independent Director, Mervin Dunn, for US$3.9m worth of shares, at about US$432 per share. That means that an insider was selling shares at slightly below the current price (US$497). We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 88.9% of Mervin Dunn's holding.
Over the last year we saw more insider selling of TransDigm Group shares, than buying. 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 are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of TransDigm Group
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. TransDigm Group insiders own 0.8% of the company, currently worth about US$224m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At TransDigm Group Tell Us?
The fact that there have been no TransDigm Group insider transactions recently certainly doesn't bother us. It's great to see high levels of insider ownership, but looking back at the last year, we don't gain confidence from the TransDigm Group insiders selling. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for TransDigm Group.
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.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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 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.