By selling US$8.2m worth of Nucor Corporation (NYSE:NUE) stock at an average sell price of US$130 over the last year, insiders seemed to have made the most of their holdings. After the stock price dropped 18% last week, the company's market value declined by US$6.9b, but insiders were able to mitigate their losses.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
The Last 12 Months Of Insider Transactions At Nucor
In the last twelve months, the biggest single sale by an insider was when the President, Leon Topalian, sold US$2.2m worth of shares at a price of US$112 per share. That means that even when the share price was below the current price of US$117, an insider wanted to cash in some shares. 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. This single sale was just 13% of Leon Topalian's stake.
In the last year Nucor insiders didn't buy any company stock. 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!
I will like Nucor better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Nucor Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Nucor shares. Specifically, insiders ditched US$1.7m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Nucor Boast High Insider Ownership?
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. Nucor insiders own about US$221m worth of shares (which is 0.7% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Nucor Insider Transactions Indicate?
Insiders haven't bought Nucor stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. On the plus side, Nucor makes money, and is growing profits. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Nucor. Every company has risks, and we've spotted 2 warning signs for Nucor (of which 1 makes us a bit uncomfortable!) you should know about.
But note: Nucor may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.
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