Shareholders might want to keep a close eye on Lockheed Martin Corporation (NYSE:LMT) after insiders sold US$13m stock earlier this year
While Lockheed Martin Corporation (NYSE:LMT) shareholders have had a good week with the stock up 5.5%, they shouldn't let their guards down. In spite of the relatively cheap prices, insiders made the decision to sell US$13m worth of stock in the last 12 months. This could be a warning indicator of vulnerabilities in the future.
Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
See our latest analysis for Lockheed Martin
Lockheed Martin Insider Transactions Over The Last Year
The Chief Operating Officer, Frank St. John, made the biggest insider sale in the last 12 months. That single transaction was for US$3.5m worth of shares at a price of US$438 each. That means that an insider was selling shares at slightly below the current price (US$486). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was 100% of Frank St. John's holding.
Over the last year we saw more insider selling of Lockheed Martin shares, than buying. You can see the insider transactions (by companies and 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Lockheed Martin Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Lockheed Martin shares over the last three months. In that time, insider Gregory Ulmer dumped US$2.9m worth of shares. On the flip side, insider John Donovan spent US$251k on purchasing shares. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.
Insider Ownership Of Lockheed Martin
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Lockheed Martin insiders own about US$81m worth of shares. That equates to 0.06% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Lockheed Martin Insiders?
The insider sales have outweighed the insider buying, at Lockheed Martin, in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. On the plus side, Lockheed Martin makes money, and is growing profits. Insider ownership isn't particularly high, so this analysis makes us cautious about the company. We're in no rush to buy! So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Lockheed Martin.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
