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Industrial Stock

10/13/2017

I contributed $50 to my IRA and $25 to my brokerage.
I wanted to get over the $500 threshold to make my next purchase so I transferred $75 to my IRA from my side hustle checking.

WW Grainger Inc (GWW) is an industrial supply company.  They don’t make anything but instead concentrate on getting products to customers quickly.  Think of them as the Amazon of the industrial world.  Their stock seemed to be at a low point.  From my dealings with them at my job, I was aware they were doing some restructuring.  With the economy booming industrial stocks typically do well when construction spending is high.  I bought 3 shares for $198.91 each, a total cost of $541.04 in my IRA account.

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2 thoughts on “Industrial Stock

  1. Since you got the information about WW Grainger’s restructuring from your job, is that a form of insider trading? Also, can your employer claim exclusivity since you learned this information through working for them?

    1. Trishkj,

      Thank you for asking these questions, insider trading is a real concern many people have. Trading must be done fairly and ethically per the rules outlined by the SEC (Securities and Exchange Commission). I’m going to give you the short answer then the long answer.

      The short answer is no, this is not insider trading. The information I received was in the public domain and therefore perfectly legal for me to use in my trading decision.

      The long answer goes into how we know if the information we have received is public or not. If you can find it in a Google search it is not a secret. How you acquired insider information is not relevant and the SEC will prosecute an offender whether they wire taped a boardroom or found a napkin with a note on it. Insider trading is criminal regardless of how you came across the information.

      Insider trading is the buying or selling of a security by someone who has access to material nonpublic information about the security. Typically knowledge of an earnings report, the settlement of a lawsuit or approval/rejection by a regulatory agency are the items that will get you in trouble. The classic case of Martha Stewart happened when she sold a large number of shares of a pharmaceutical company right before news of a drug being rejected by the FDA became public. Stewart saved about $46,000 by selling before the news became public, but ended up serving 5 months in prison. She got a tip from her trusted financial advisor at Merrill Lynch but it didn’t matter where she got the information. She used it for her own personal gain and that was a violation of the law.

      If you are ever unsure if the knowledge you received is in the public domain you can do a few things to check. The easiest way to search on Google or a financial news website like Fox Business, CNBC, Forbes or Yahoo! Finance for a news article about the information in question. If you find an article containing the information you know that it is safe to assume that it is public knowledge, trade away!

      If you can’t find a news article that doesn’t mean all is lost, you still have options, they just take more work. Every publicly traded company is required to file a report with the SEC every year. This filing is a wealth of knowledge and usually gives a lot of insight into the future plans and business strategies of a company. You can find these reports on most financial websites. I use Yahoo! Finance, search for the stock, GWW and click on the profile tab. On the right-hand side of the page are all the filing, 8K, 10Q and the annual one we are looking for the 10K. All filing are public information and are worth reading if you are investigating a company. I like to 10K because it contains a great overview of the company and included comments from management.

      In the case of WW Grainger (GWW), they filed their 10K in February of 2017. I heard about the restructuring in June. You may check me on this, look up page 14 of 2017 10K for GWW, they specifically mention the restructuring and even tell you how much they are spending on it. Once something is in the public domain, such as a 10K filing, anyone can use that information for whatever they want. Remember where you heard it is irrelevant, the SEC only cares if you have knowledge that everyone else does not have. In this case the I heard about the restructuring through a Grainger employee but the information I received was in the public domain, therefore no one can place any restrictions on how I use the information.

      I hope this answers your questions. Please let me know if you have any others.

      Thanks for reading! Happy investing!!

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