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 shareholders might well want to know whether insiders have been buying or selling shares in Donaldson Company, Inc. (NYSE:DCI).
What Is Insider Selling?
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.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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.'
The Last 12 Months Of Insider Transactions At Donaldson Company
In the last twelve months, the biggest single sale by an insider was when the Chairman, Tod Carpenter, sold US$200k worth of shares at a price of US$50.02 per share. That means that even when the share price was below the current price of US$52.65, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 3.5% of Tod Carpenter's stake. Tod Carpenter was the only individual insider to sell shares in the last twelve months.
You can see a visual depiction of insider transactions (by individuals) 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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Donaldson Company Insiders Are Selling The Stock
Over the last three months, we've seen notably more insider selling, than insider buying, at Donaldson Company. We note Tod Carpenter cashed in US$200k worth of shares. Meanwhile Director Douglas Milroy bought US$27k worth, as we said above. Generally this level of net selling might be considered a bit bearish.
Does Donaldson Company 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. It appears that Donaldson Company insiders own 0.4% of the company, worth about US$26m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Donaldson Company Insiders?
The stark truth for Donaldson Company is that there has been more insider selling than insider buying in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. But it is good to see that Donaldson Company is growing earnings. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! 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, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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.