General Dynamics Insiders are Unloading Some Serious Shares

This story from Wall Street Cheat Sheet

Insider Monkey reports ominously that General Dynamics‘ (NYSE:GD) stock is at the “magic level” where a lot of its insiders sell shares. It’s certainly true that a lot of its insiders have sold shares in the past month: 17 of them, to be exact, have sold shares. Following is a summary of their stock sales, all of which were reported as having occurred on January 2nd, 2011:

1. Robert Walmsley, a Director, sold 137 shares at $70.22 for $9,620.14.
2. S. Daniel Johnson, an Officer, sold 696 shares at $70.22 for $48,783.12.
3. Nicholas D. Chabraja, a Director, sold 17,732 shares at $70.22 for $1,245,141.04.
4. Christopher Marzilli, an Officer, sold 1,080 shares at $70.22 for $75,837.60.
5. David K Heebner, an Officer, sold 1,558 shares at $70.22 for $109,402.76.
6. George A Joulwan, a Director, sold 140 shares at $70.22 for $9,830.80.
7. Lewis F Von Thaer, an Officer, sold 1,050 shares at $70.22 for $73,731.00.
8. Jason W Aiken, an Officer, sold 310 shares at $70.22 for $21,768.20.
9. Redd L Hugh, Chief Financial Officer, sold 1,913 shares at $70.22 for $134,330.86.
10. Gerard J Demuro, Jr., an Officer, sold 2,824 shares at $70.22 for $198, 301.28.
11. Mark C. Roualet, an Officer, sold 368 shares at $70.22 for $25,840.96.
12. William P Fricks, a Director, sold 114 shares at $70.22 for $8,005.08.
13. Jay L Johnson, Chief Executive Officer, sold 166 shares at $70.22 for $11,656.52.
14. John P. Casey, an Officer, sold 1,162 shares at $70.22 for $81,595.64.
15. Joseph T. Lombardo, an Officer, sold 1,765 shares at $70.22 for $123,938.30.
16. Walter M. Oliver, an Officer, sold 1,694 shares at $70.22 for $118,952.68.
17. Phebe N. Novakovic, an Officer, sold 1,726 shares at $70.22 for $121,199.72

The median amount that these directors and officers received for their stock sales is about $76,000.  (I am using the median, rather than the mean, because this is a skewed distribution.  Nicholas D. Chabraja’s sale of 17,732 shares for $1,245,141.04 skews the distribution.)

The total number of shares sold is 34,445.  General Dynamics has a float of around 377 million shares.  This means that insider sales comprised 0.011% of the total float.  Further, the stock has increased in price since January 2nd, to around $73 per share.

Finally, insiders own around 7% of General Dynamics‘ outstanding stock.

The important thing to remember here is that this is not an example of manic selling by insiders worried that their company is going to go bankrupt. All of the insiders have sold a modest amount of shares, both in relation to their overall holdings of company stock, and in relation to the amount of shares issued by the company overall.

Insider trading is a useful metric to take into consideration when examining a company’s prospects. But numbers without context are often misleading, and there is nothing more misleading than saying that sales of 0.011% of a company’s float indicates a “magic level” at which its insiders dump their shares.

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