It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell 3M Company (NYSE:MMM), 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.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At 3M
The Group President of Enterprise Operations, Eric Hammes, made the biggest insider sale in the last 12 months. That single transaction was for US$897k worth of shares at a price of US$177 each. That means that an insider was selling shares at slightly below the current price (US$197). 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was 52% of Eric Hammes's holding.
Insiders in 3M didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!NYSE:MMM Insider Trading Volume June 29th 2021
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does 3M Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that 3M insiders own 0.07% of the company, worth about US$77m. 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 3M Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. We don't take much encouragement from the transactions by 3M insiders. But it's good to see that insiders own shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing 3M. While conducting our analysis, we found that 3M has 1 warning sign and it would be unwise to ignore it.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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.
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. 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.
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