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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 Magna International Inc. (TSE:MG).
Do Insider Transactions Matter?
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, 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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 Magna International
In the last twelve months, the biggest single sale by an insider was when the Executive VP & CFO, Vincent Galifi, sold CA$8.3m worth of shares at a price of CA$84.20 per share. That means that an insider was selling shares at around the current price of CA$74.25. While we don't usually like to see insider selling, it's more concerning if the sales take price at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
In total, Magna International insiders sold more than they bought over the last year. The chart below shows insider transactions (by individuals) over the last year. 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.
Magna International Insiders Are Selling The Stock
Over the last three months, we've seen significant insider selling at Magna International. In total, insiders sold US$13m 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 Magna International Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Magna International insiders own about CA$234m worth of shares (which is 1.0% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Magna International Tell Us?
Insiders sold Magna International shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. On the plus side, Magna International makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in Magna International, you should check out this free report on analyst forecasts for the company.
But note: Magna International 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.
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.