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 before you buy or sell General Dynamics Corporation (NYSE:GD), you may well want to know whether insiders have been buying or selling.
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, 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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
General Dynamics Insider Transactions Over The Last Year
Notably, that recent purchase by John Stratton is the biggest insider purchase of General Dynamics shares that we've seen in the last year. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$150). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
General Dynamics insiders may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
General Dynamics Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at General Dynamics. Specifically, insider John Stratton bought US$502k worth of shares in that time, and we didn't record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
Does General Dynamics Boast High Insider Ownership?
Many investors like to check how much of a company is owned by 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. It's great to see that General Dynamics insiders own 3.4% of the company, worth about US$1.5b. 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 General Dynamics Tell Us?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about General Dynamics. Nice! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with General Dynamics and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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