We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Compass Minerals International, Inc. (NYSE:CMP).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Compass Minerals International Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chief Financial Officer James Standen bought US$99k worth of shares at a price of US$39.50 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of US$56.83. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Compass Minerals International Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Our data indicates that Compass Minerals International insiders own about US$6.6m worth of shares (which is 0.3% of the company). We do generally prefer see higher levels of insider ownership.
So What Do The Compass Minerals International Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Compass Minerals International shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. The transactions are fine but it'd be more encouraging if Compass Minerals International insiders bought more shares in the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For instance, we've identified 2 warning signs for Compass Minerals International (1 can't be ignored) you should be aware of.
Of course Compass Minerals International may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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