We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell ECN Capital Corp. (TSE:ECN), you may well want to know whether insiders have been buying or selling.
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 don't think shareholders should simply follow insider transactions. 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 ECN Capital
CEO & Director Steven Hudson made the biggest insider purchase in the last 12 months. That single transaction was for CA$800k worth of shares at a price of CA$3.80 each. So it's clear an insider wanted to buy, at around the current price, which is CA$4.61. That means they have been optimistic about the company in the past, though they may have changed their mind. 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. The good news for ECN Capital share holders is that insiders were buying at near the current price.
Happily, we note that in the last year insiders bought 635k shares for a total of CA$2.5m. While ECN Capital insiders bought shares last year, they didn't sell. 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!
ECN Capital is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
ECN Capital Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at ECN Capital. Not only was there no selling that we can see, but they collectively bought US$961k worth of shares. This is a positive in our book as it implies some confidence.
Insider Ownership of ECN Capital
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 7.6% of ECN Capital shares, worth about CA$84m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The ECN Capital Insider Transactions Indicate?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of ECN Capital we think they are probably pretty confident of a bright future. 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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