We often see insiders buying up shares in companies that perform well over the long term. 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 Northrop Grumman Corporation (NYSE:NOC).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
Check out our latest analysis for Northrop Grumman
The Last 12 Months Of Insider Transactions At Northrop Grumman
Over the last year, we can see that the biggest insider sale was by the insider, Mary Petryszyn, for US$1.4m worth of shares, at about US$362 per share. While we don’t usually like to see insider selling, it’s more concerning if the sales take place at a lower price. The good news is that this large sale was at well above current price of US$298. So it is hard to draw any strong conclusion from it.
Insiders in Northrop Grumman didn’t buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Northrop Grumman better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that Northrop Grumman insiders own 0.4% of the company, worth about US$182m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Northrop Grumman Insider Transactions Indicate?
The fact that there have been no Northrop Grumman insider transactions recently certainly doesn’t bother us. While we feel good about high insider ownership of Northrop Grumman, we can’t say the same about the selling of shares. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. Every company has risks, and we’ve spotted 1 warning sign for Northrop Grumman you should know about.
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.
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