The fact that multiple Lockheed Martin Corporation (NYSE:LMT) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

The Last 12 Months Of Insider Transactions At Lockheed Martin

Over the last year, we can see that the biggest insider sale was by the Chief Operating Officer, Frank St. John, for US$2.8m worth of shares, at about US$428 per share. That means that even when the share price was below the current price of US$546, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent 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. This single sale was 100% of Frank St. John's stake.

Insiders in Lockheed Martin didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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Lockheed Martin Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Lockheed Martin. In total, insider Stephanie Hill sold US$1.8m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.05% of Lockheed Martin shares, worth about US$71m. 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 Lockheed Martin Insiders?

An insider hasn't bought Lockheed Martin stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. But since Lockheed Martin is profitable and growing, we're not too worried by this. Insiders own shares, but we're still pretty cautious, given the history of sales. We'd practice some caution before buying! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with Lockheed Martin and understanding them should be part of your investment process.

But note: Lockheed Martin 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 of direct interests only, but not derivative transactions or indirect interests.

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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.