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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 before you buy or sell Consolidated Water Co. Ltd. (NASDAQ:CWCO), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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 Consolidated Water
Director Raymond Whittaker made the biggest insider sale in the last 12 months. That single transaction was for US$242k worth of shares at a price of US$14.20 each. Although we don’t gain confidence from insider selling, we note that this large sale was at well above current price of US$11.32. So it may not shed much light on insider confidence at current levels.
We note that in the last year insiders divested 19.85k shares for a total of US$283k. Over the last year we saw more insider selling of Consolidated Water shares, than buying. They sold for an average price of about US$14.27. It is certainly not great to see that insiders have sold shares in the company. But the selling was at much higher prices than the current share price (US$11.32), so it probably doesn’t tell us a lot about the value on offer today. 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!
I will like Consolidated Water better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Consolidated Water
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data suggests Consolidated Water insiders own 2.7% of the company, worth about US$4.6m. I generally like to see higher levels of ownership.
So What Does This Data Suggest About Consolidated Water Insiders?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. We don’t take much encouragement from the transactions by Consolidated Water insiders. And we’re not picking up on high enough insider ownership to give us any comfort. Of course, the future is what matters most. So if you are interested in Consolidated Water, you should check out this free report on analyst forecasts for the company.
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 email@example.com.