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Dover Corporation provides equipment and components, specialty systems, consumable supplies, software and digital solutions, and support services worldwide. Dover’s insiders have divested from 87.25k shares in the large-cap stock within the past three months. A well-known argument is that insiders divesting from their own companies’ shares sends a pessimistic signal. A research published in The MIT Press (1998) concluded that stocks following insider selling fell 2.7% compared to the market. However, these signals may not be enough to gain conviction on whether to divest. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.
View our latest analysis for Dover
Who Are Selling Their Shares?
More shares have been sold than bought by Dover’s insiders in the past three months. In total, individual insiders own over 2.12 million shares in the business, which makes up around 1.43% of total shares outstanding. The following insiders have recently reduced their company holdings: Brad Cerepak (board member) , Jay Kloosterboer (management) , Kristiane Graham (board member) and Mary Winston (management) .
Does Selling Activity Reflect Future Growth?
At first glance, analysts’ earnings expectations of 10.07% over the next three years illustrates a good outlook for the company. However this is inconsistent with the signal company insiders are sending with their net selling activity. Probing further into annual growth rates, Dover is believed to experience decline in top-line growth next year, which could imply some headwinds going forward. This is expected to impact the bottom line with a growth of -14.46% next year, implying cost management may not be efficient enough to bring the company into a positive growth zone. Insiders’ net selling activity seems to bolster this negative sentiment. Otherwise, they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.
Did Stock Price Volatility Instigate Selling?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Within the past three months, Dover’s share price traded at a high of $83.95 and a low of $72.45. This suggests reasonable volatility with a change of 15.87%. Insiders’ purchases may not be driven by this movement but perhaps they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.