We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Cambridge Bancorp (NASDAQ:CATC).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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'.
The Last 12 Months Of Insider Transactions At Cambridge Bancorp
In the last twelve months, the biggest single purchase by an insider was when Independent Director Leon Palandjian bought US$158k worth of shares at a price of US$52.82 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$49.64). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While Cambridge Bancorp insiders bought shares during the last year, they didn't sell. The chart below shows insider transactions (by companies and 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!
Cambridge Bancorp 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 Cambridge Bancorp Have Bought Stock Recently
There was some insider buying at Cambridge Bancorp over the last quarter. insider Simon Gerlin bought US$10k worth of shares in that time. It's great to see that insiders are only buying, not selling. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.
Does Cambridge Bancorp 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 3.0% of Cambridge Bancorp shares, worth about US$10m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Cambridge Bancorp Insider Transactions Indicate?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. That said, the purchases were not large. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think Cambridge Bancorp insiders are doubting the company, and they do own shares. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Cambridge Bancorp. While conducting our analysis, we found that Cambridge Bancorp has 1 warning sign and it would be unwise to ignore this.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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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