Market Overview

Insider Sells A.O. Smith's Stock

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A Form 4 filing filed with the SEC on Monday, February 7 showed that President & LLC Goodwin Wallace E sold 5,600 shares of A.O. Smith Inc (NYSE:AOS)at an average price of $52.28. The transaction moved the executive's stake in A.O. Smith Inc. to 16,098 shares. Shares of A.O. Smith rose by 2% from the previous closing price.

The Importance of Insider Transactions

Insider transactions shouldn't be used primarily to make an investing decision, however an insider transaction can be an important factor in the investing decision.

Insiders buying stock after a notable sell off can indicate an insider's long-term belief in the success of the company; insiders buying stock at new highs can be an indication the exec doesn't feel the stock is overvalued. Insiders who sell stock at new lows could be anticipating some capitulation moment. If the insider sells at new highs, it could point to the intention to "take some profit" and "lock in a gain."

Important Transaction Codes

Wall Street tends to focus on insider transactions which take place in the open market, viewed inside a Form 4 filing via codes P for purchase and S for sale. If the transaction was an open-market transaction, that means that the insider made a concious decision for the company's stock moving forward.

Transaction codes other than P or S are often viewed with less conviction as they are often not tied to a decision by the exec. As an example, transaction code C indicates the conversion of an option. Transaction code A indicates the insider may have been forced to sell shares in order to receive compensation the exec was promised upon being hired by a company.

 

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