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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 we'll take a look at whether insiders have been buying or selling shares in Morneau Shepell Inc. (TSE:MSI).
What Is Insider Selling?
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.
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 Morneau Shepell
Over the last year, we can see that the biggest insider purchase was by Independent Director Luc Bachand for CA$113k worth of shares, at about CA$28.23 per share. So it's clear an insider wanted to buy, at around the current price, which is CA$31.05. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. In this case we're pleased to report that the insider purchases were made at close to current prices.
In the last twelve months insiders purchased 8.70k shares for CA$249k. On the other hand they divested 3.10k shares, for CA$96k. In the last twelve months there was more buying than selling by Morneau Shepell insiders. 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!
Morneau Shepell is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Morneau Shepell
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. We usually like to see fairly high levels of insider ownership. Based on our data, Morneau Shepell insiders have about 0.2% of the stock, worth approximately CA$5.1m. We prefer to see high levels of insider ownership.
So What Does This Data Suggest About Morneau Shepell Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. We'd like to see bigger individual holdings. However, we don't see anything to make us think Morneau Shepell insiders are doubting the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example, Morneau Shepell has 3 warning signs (and 1 which can't be ignored) we think 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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