We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Capstead Mortgage Corporation (NYSE:CMO).
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 on the market. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
Capstead Mortgage Insider Transactions Over The Last Year
Director Christopher Mahowald made the biggest insider purchase in the last 12 months. That single transaction was for US$507k worth of shares at a price of US$6.76 each. That implies that an insider found the current (approximate) price enticing. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. We generally consider it a positive if insiders have been buying on market, even if the share price has increased a bit since then.
In the last twelve months insiders paid US$1.1m for 165.00k shares purchased. Overall, Capstead Mortgage insiders were net buyers last year. The average buy price was around US$6.86. Although they bought at below the recent price of US$8.39 per share, it is good to see that insiders are willing to invest in the company. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Capstead Mortgage is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Capstead Mortgage Insiders Bought Stock Recently
It’s good to see that Capstead Mortgage insiders have made notable investments in the company’s shares. We can see that Director John Bernard paid US$150k for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.
Does Capstead Mortgage Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Capstead Mortgage insiders own about US$14m worth of shares. That equates to 2.0% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Capstead Mortgage Insiders?
The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. When combined with notable insider ownership, these factors suggest Capstead Mortgage insiders are well aligned, and that they may think the share price is too low. Of course, the future is what matters most. So if you are interested in Capstead Mortgage, you should check out this free report on analyst forecasts for the company.
But note: Capstead Mortgage may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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