It is not uncommon to see companies perform well in the years after insiders buy shares. 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 before you buy or sell Methanex Corporation (TSE:MX), you may well want to know whether insiders have been buying or selling.
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'.
The Last 12 Months Of Insider Transactions At Methanex
In the last twelve months, the biggest single purchase by an insider was when President John Floren bought CA$1.5m worth of shares at a price of CA$45.65 per share. That means that an insider was happy to buy shares at above the current price of CA$25.85. 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 always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Happily, we note that in the last year insiders paid CA$4.6m for 114.35k shares. On the other hand they divested 6.50k shares, for CA$336k. In the last twelve months there was more buying than selling by Methanex insiders. Their average price was about CA$40.19. I'd consider this a positive as it suggests insiders see value at around the current price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Methanex is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Methanex Have Bought Stock Recently
It's good to see that Methanex insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought CA$422k worth of shares. This could be interpreted as suggesting a positive outlook.
Does Methanex 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. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Methanex insiders own 0.9% of the company, worth about CA$17m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Methanex Tell Us?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in Methanex shares, given these transactions (along with notable insider ownership of the company). In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Methanex. Every company has risks, and we've spotted 5 warning signs for Methanex (of which 2 make us uncomfortable!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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