We wouldn't blame Cummins Inc. (NYSE:CMI) shareholders if they were a little worried about the fact that Nicole Lamb-Hale, the VP, Chief Administrative Officer & Corporate Secretary recently netted about US$1.7m selling shares at an average price of US$685. That's a big disposal, and it decreased their holding size by 19%, which is notable but not too bad.

The Last 12 Months Of Insider Transactions At Cummins

In the last twelve months, the biggest single sale by an insider was when the Independent Director, William Miller, sold US$11m worth of shares at a price of US$604 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$680. 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 34% of William Miller's holding.

Over the last year we saw more insider selling of Cummins shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

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Insider Ownership Of Cummins

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. It's great to see that Cummins insiders own 0.3% of the company, worth about US$312m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Cummins Tell Us?

Insiders sold stock recently, but they haven't been buying. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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 of direct interests only, but not derivative transactions or indirect interests.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.