Huntington Ingalls board members who almost never buy company stock bought just before Trump’s speech sent it sky-high
An accounting professor who studies trading by corporate insiders described the transactions as “very unusual.”
Three directors of Huntington Ingalls Industries, one of America’s largest military shipbuilders, hadn’t bought a penny’s worth of company stock in years. But last month, just ahead of President Trump’s State of the Union address that included a surprise promise to “resurrect” the US shipbuilding industry, they decided to place buy orders.
Huntington Ingalls’ chairman, retired US Navy Admiral Kirkland H. Donald, and directors John K. Welch and Thomas C. Schievelbein bought stock on February 27, February 26, and February 13, respectively. Trump made his shipbuilding proclamation on the evening of March 4, catalyzing a 12.4% spike in Huntington Ingalls shares the next day. That was the single best day for the company’s stock since it went public in 2011.
The nearly 3,700 shares the directors bought went up in value by more than $90,000 that day, and as of Friday's trading, they’ve gained in value by roughly another $10,000 since then. No SEC filings have indicated that the board members have sold shares since those purchases.
While all three men have relatively sizable holdings of the company’s shares, they’ve been largely awarded as part of their compensation packages for being board members. They rarely, if ever, buy shares on the open market.
Prior to the February purchases, there are no records of Donald, a Huntington director since 2017, or Welch, a director since 2015, purchasing Huntington stock on the open market in recent history. The only somewhat recent record of purchases by Schievelbein, who’s been a director since 2011, occurred in March 2020 during the sharp sell-off in the market because of COVID-19.
Daniel Taylor, professor of accounting at the University of Pennsylvania’s Wharton School, studies trading by corporate insiders. He reviewed SEC records related to the trades and described the transactions as “very unusual” in light of the fact that the men had done little, if any, active trading in the past.
“The timing of these trades in a major shipbuilder, by members of the board of that shipbuilder, less than one week before the president announces a new shipbuilding initiative is highly suspicious,” Taylor said.
In response to a series of questions related to the stock purchases, Danny Hernandez, director of public affairs at Huntington Ingalls, wrote in a statement: “We do not provide specifics relating to our directors. We maintain robust policies and procedures governing trading, and these are publicly available with the company’s public filings at SEC.gov. They were followed as expected with respect to the transactions at issue.”
The directors themselves also declined to comment, Hernandez said.
Trump’s announcement was a needed piece of good news for Huntington Ingalls, which was effectively Northrop Grumman’s shipbuilding division before it was spun off as an independent public company in 2011.
For most of the last decade, the company had performed well, but since the stock hit a high last March, its share price had dropped roughly 40% as it struggled with labor and supply-chain issues that hampered production, as well as the slow pace of Navy contracting. But the stock is up about 14% since Trump’s State of the Union address, outpacing a nearly 3% drop in the S&P 500.
“We used to make so many ships,” Trump told the joint session of Congress. “We don’t make them anymore very much, but we’re going to make them very fast, very soon.” He added that he hopes to offer special tax incentives for the industry.
Subsequent reporting from Reuters, citing White House documents the news service reviewed, suggests the administration is preparing an executive order that would create a Maritime Security Trust Fund to disperse tax credits, grants, and loans to boost American shipbuilding.
The trust fund would be paid for in part by levies charged on imports delivered to the US on Chinese-made ships. The Office of the US Trade Representative has recently taken initial bureaucratic steps toward implementing such fees.
