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We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Canadian Pacific Railway Limited (TSE:CP).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
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. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
The Last 12 Months Of Insider Transactions At Canadian Pacific Railway
Chairman of the Board Andrew Reardon made the biggest insider sale in the last 12 months. That single transaction was for CA$971k worth of shares at a price of CA$271 each. That means that an insider was selling shares at around the current price of CA$263. While their view may have changed since the sale, this is not a particularly positive fact. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
Happily, we note that in the last year insiders paid CA$519k for 2.13k shares. On the other hand they divested 3.73k shares, for CA$1.0m. In total, Canadian Pacific Railway insiders sold more than they bought over the last year. The sellers received a price of around CA$268, on average. It’s not particularly great to see insiders were selling shares at below recent prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. 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.
Insiders at Canadian Pacific Railway Have Sold Stock Recently
Over the last three months, we’ve seen notably more insider selling, than insider buying, at Canadian Pacific Railway. In total, Andrew Reardon sold CA$971k worth of shares in that time. Meanwhile Independent Director Matthew Paull bought CA$485k worth. Because the selling vastly outweighs the buying, we’d say this is a somewhat bearish sign.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that Canadian Pacific Railway insiders own about CA$7.4m worth of shares (which is 0.02% of the company). Overall, this level of ownership isn’t that impressive, but it’s certainly better than nothing!
So What Do The Canadian Pacific Railway Insider Transactions Indicate?
The insider sales have outweighed the insider buying, at Canadian Pacific Railway, in the last three months. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. When you consider that most companies have higher levels of insider ownership, we’re a little wary. As the saying goes, only fools rush in. 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.