Insider buying can provide clues about a stock’s next move. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.
In this report, we are going to highlight an interesting insider purchase at Lockheed Martin Corp (LMT:US). Lockheed Martin is an American security and aerospace company that is engaged in the research, design, and development of advanced technology systems, products, and services. The business, which is headquartered in Bethesda, MaryLand, is organized around four core business areas: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. It’s listed on the New York Stock Exchange and currently has a market cap of $105.6 billion.
$250k insider purchase at Lockheed Martin
Our insider transaction data shows that on July 20, board member John Donovan purchased 632 LMT shares at a price of $396.16 per share. This trade cost the insider approximately $250,000 and increased his holding to 1,200 shares.
This trade caught our attention due to the fact that it has increased Mr. Donovan’s holding by over 100%. When an insider substantially increases their position size like this, it usually means that they are very confident in relation to their company’s prospects.
What’s also interesting is that Mr. Donovan – who was previously CEO of AT&T Communications – has considerable experience in the security space. Currently, he is Chair of the President’s National Security Telecommunications Advisory Committee (NSTAC). So, he is likely to have a good understanding of the investment potential here.
Value on offer
Lockheed Martin’s share price recently hit a six-month low after the company posted its Q2 results.
For the period, net sales were down 9% year on year to $15.4 billion. Meanwhile earnings per share came in at $1.16 versus the consensus estimate of $1.73.
The company also lowered its full-year 2022 forecast for net sales to $65.25 billion and diluted earnings per share to $21.55 from previous guidance of $66.00 billion and $26.70, respectively.
The company blamed supply chain issues, a lack of federal funding, and the timing of customer contract negotiations for the poor performance.
However, given the high level of geopolitical tension globally, Lockheed Martin shares could have rebound potential. After the recent share price fall, the stock now looks quite cheap. With analysts expecting the group to generate earnings per share of $28.20 next year, the forward-looking P/E ratio here is just 14. Meanwhile, the dividend yield is now above 3%.
The purchase from Mr. Donovan here suggests that he sees value at current levels. We see this insider purchase as a bullish indicator.