It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Norbord Inc. (TSE:OSB).
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, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. 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.
Norbord Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Lead Director Paul Houston bought CA$198k worth of shares at a price of CA$30.31 per share. So it's clear an insider wanted to buy, at around the current price, which is CA$34.59. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we're pleased to report that the insider bought shares at close to current prices. The only individual insider to buy over the last year was Paul Houston. Notably Paul Houston was also the biggest seller.
Paul Houston bought a total of 13315 shares over the year at an average price of CA$28.81. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Norbord is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Norbord Have Bought Stock Recently
Over the last three months, we've seen significantly more insider buying, than insider selling, at Norbord. In total, Lead Director Paul Houston bought US$384k worth of shares in that time. But Lead Director Paul Houston sold shares worth US$21k. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data suggests Norbord insiders own 0.2% of the company, worth about CA$6.1m. We prefer to see high levels of insider ownership.
So What Do The Norbord Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. While the overall levels of insider ownership are below what we'd like to see, the history of transactions imply that Norbord insiders are reasonably well aligned, and optimistic for the future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Norbord.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.