General Dynamics Sees $1 Mil Insider Purchase

Insider buying can help identify undervalued companies. Insiders tend to be value investors. If they’re purchasing company stock, it’s usually because they believe the market is undervaluing the business.

In this report, we are going to highlight some interesting insider buying at General Dynamics Corp (GD:US). General Dynamics is a global aerospace and defense company that offers products and services in the areas of business aviation, combat vehicles, weapons systems, C4ISR, and shipbuilding. It is listed on the New York Stock Exchange and currently has a market cap of $57.94 billion.

Insider Buying at General Dynamics

2iQ data shows that on May 2, board member Mark Malcolm purchased 4,700 GD shares at a price of $214.47 per share. This trade cost the insider approximately $1.01 million and increased his total holding to 13,607 shares.

Substantial Purchase

This trade is notable for several reasons.

Firstly, it’s large in nominal terms and it has increased the size of the insider’s position by a significant percentage (53%). The size of the trade suggests that Mr. Malcolm sees considerable value in the stock at present.

Secondly, Mr. Malcolm – who has served as a director since 2015 – has experience in the investment world. Previously, he served as a Senior Adviser to Cerberus Capital Management – a global alternative investment firm.

Share Price Pullback

General Dynamics recently posted a solid set of Q1 results.

For the period, revenue amounted to $9.9 billion, up 5.2% year on year. Diluted earnings per share came in at $2.64, up 1.1% year on year, and ahead of the consensus forecast of $2.59.

However, the stock pulled back after the company warned that Q2 revenue would be lower than expected. The company blamed a lack of revenue from its newest business jet, the G700, for the below-par outlook.

Analysts expect revenue growth to re-accelerate in the second half of 2023 though. For example, analysts at Bernstein have said that they are expecting a “strong H2 recovery, when G700 deliveries should start."

In light of the dip in the share price here, which has left the stock trading at a very reasonable valuation, we see the insider buying as a bullish development.