Shareholders may not want to ignore $13 million worth of sales by Lockheed Martin Corporation (NYSE:LMT) insiders last year
Whereas Lockheed Martin Company (New York Stock Exchange: LMT) shareholders had a good week with the stock up 6.7%, they should not let their guard down. The fact that insiders chose to divest $13 million worth of shares over the past 12 months, even though prices were relatively low, could indicate some anticipated weakness.
While we don’t believe shareholders should simply follow insider trades, logic dictates that you pay attention to whether insiders are buying or selling shares.
The last 12 months of insider trading at Lockheed Martin
Chief Operating Officer Frank St. John made the biggest insider sell in the past 12 months. This single transaction was for $3.5 million worth of shares at a price of $438 each. This means that an insider was selling shares at a price slightly lower than the current price (US$485). When an insider sells below the current price, it suggests that they consider this lower price to be fair. This makes us wonder what they think of the recent (higher) valuation. While insider selling is not a positive sign, we can’t be sure if it means insiders believe the stock is fully priced, so it’s only a weak sign. We note that the largest sale was the 100% sale of Frank St. John’s.
Over the past year, we’ve seen more insiders sell Lockheed Martin stock than buy. You can see a visual representation of insider trading (by companies and individuals) over the past 12 months, below. By clicking on the graph below, you will be able to see the precise detail of each insider trade!
I’d like Lockheed Martin better if I see big insider buys. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Lockheed Martin insiders sell shares
We’ve seen more insider selling than insider buying at Lockheed Martin recently. We note that insider Gregory Ulmer cashed in for $2.9 million worth of stock. On the other hand, we note that insider John Donovan bought US$251,000 worth of stock. Since the sell really outweighs the buy, we would say that these trades may suggest that some insiders believe the stock isn’t cheap.
Insider ownership of Lockheed Martin
Examining the total insider holdings in a company can help you know if they are well aligned with common shareholders. We generally like to see fairly high levels of insider ownership. It appears that Lockheed Martin insiders own 0.06% of the company, worth around $80 million. While this is a high but not exceptional level of insider ownership, it suffices to indicate some alignment between management and small shareholders.
What could insider trading at Lockheed Martin tell us?
The hard truth for Lockheed Martin is that there have been more insider selling than insider buying in the past three months. Zooming out, the longer term image doesn’t give us much comfort. But it’s good to see Lockheed Martin increasing its profits. Although the insiders own shares, they don’t own a whole lot and they sold. We would therefore only buy after careful consideration. So, while it is useful to know what insiders are doing in terms of buying or selling, it is also useful to know the risks that a particular company faces. In terms of investment risks, we have identified 2 warning signs with Lockheed Martin and understanding them should be part of your investment process.
Sure Lockheed Martin may not be the best stock to buy. So you might want to see this free set of high quality companies.
For the purposes of this article, insiders are persons who report their transactions to the relevant regulatory body. We currently record open market transactions and private dispositions, but not derivative transactions.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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