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 shareholders might well want to know whether insiders have been buying or selling shares in Canadian Pacific Railway Limited (TSE:CP).
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 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.
Canadian Pacific Railway Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Senior VP & Chief Risk Officer, Laird Pitz, for CA$3.7m worth of shares, at about CA$315 per share. So what is clear is that an insider saw fit to sell at around the current price of CA$294. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
Happily, we note that in the last year insiders paid CA$519k for 2125 shares. But they sold 16904 for CA$5.2m. All up, insiders sold more shares in Canadian Pacific Railway than they bought, over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Canadian Pacific Railway Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Canadian Pacific Railway. In total, insiders sold CA$4.2m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Canadian Pacific Railway Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.02% of Canadian Pacific Railway shares, worth about CA$7.6m, according to our data. We do generally prefer see higher levels of insider ownership.
So What Do The Canadian Pacific Railway Insider Transactions Indicate?
Insiders sold Canadian Pacific Railway shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Canadian Pacific Railway is growing earnings. When you combine this with the relatively low insider ownership, we are very cautious about the stock. We'd certainly think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
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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.