Investors closely monitor insider buys, as they can give hints surrounding the long-term picture.

But it’s critical to note that insiders have a longer holding period than most, and many strict rules apply to their transactions.

Recently, insiders of several companies – Cummins CMI, Caterpillar CAT, and Southwest Airlines LUV – have made splashes, acquiring shares. Let’s take a closer look at the transactions for those interested in trading like the insiders.

CMI Shares Soar

A director of Cummins recently acquired 1k CMI shares, with the total transaction value totaling just under $340k. CMI shares have been notably strong over the last month thanks to its latest set of better-than-expected results, up more than 20% and widely outperforming relative to the S&P 500.Zacks Investment Research

Image Source: Zacks Investment Research

Still, despite the positivity concerning the recent insider buy, the stock’s EPS outlook remains under pressure, and investors would be better off waiting until positive earnings estimate revisions hit the tape consistently.

We’ve begun to see some positive revisions trickle in already for its current fiscal year, with the current $20.95 Zacks Consensus EPS estimate up from the original $20.77 per share estimate at the beginning of May.Zacks Investment Research

Image Source: Zacks Investment Research

LUV Insider Steps In

A director of Southwest Airlines stepped up big in early May, acquiring roughly 3.7k LUV shares at a total cost of $100k. It was a sizable purchase, increasing their total shares held by nearly 25%.

Similar to CMI, Southwest shares have been red-hot over the past month thanks to its latest set of quarterly results, up more than 35% compared to the S&P 500’s 15% gain.Zacks Investment Research

Image Source: Zacks Investment Research

CAT Keeps Paying Shareholders

A director of Caterpillar recently acquired 375 CAT shares at a total transaction value of roughly $120k. It’s worth noting that the same director has consistently bought shares over recent years, underpinning their confidence in the long-term outlook of the company.

CAT has long displayed a shareholder-friendly nature, holding the ranks of a Dividend Aristocrat. Shares currently yield a solid 1.6% annually, with the company also sporting a 7.7% five-year annualized dividend growth rate.

Below is a chart illustrating the company’s dividends paid on an annual basis.Zacks Investment Research

Image Source: Zacks Investment Research

Bottom Line

Many investors closely monitor insider buys, looking to receive insights into the longer-term picture. The transactions shouldn’t be relied on for near-term performance, as insiders’ holding periods are longer than most, and many strict rules apply.

Story Continues

Rather, investors can see insider buys as an overall net positive concerning the longer-term outlook.

All large-cap stocks above – Cummins CMI, Caterpillar CAT, and Southwest Airlines LUV – have seen recent insider activity.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Caterpillar Inc. (CAT):Free Stock Analysis Report

Southwest Airlines Co. (LUV):Free Stock Analysis Report

Cummins Inc. (CMI):Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

View Comments