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 Canadian Pacific Railway Limited (TSE:CP).
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.
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 Canadian Pacific Railway
In the last twelve months, the biggest single sale by an insider was when the Senior VP & Chief Risk Officer, Laird Pitz, sold CA$3.7m worth of shares at a price of CA$315 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of CA$332. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. While insider selling is not a positive sign, we can’t be sure if it does mean insiders think the shares are fully valued, so it’s only a weak sign. This single sale was 100% of Laird Pitz’s stake.
Canadian Pacific Railway insiders didn’t buy any shares over the last year. 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!
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Canadian Pacific Railway Insiders Are Selling The Stock
The last three months saw significant insider selling at Canadian Pacific Railway. In total, insiders sold CA$505k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the insiders think that the shares are a bargain.
Does Canadian Pacific Railway Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.02% of Canadian Pacific Railway shares, worth about CA$8.0m, according to our data. We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Canadian Pacific Railway Insiders?
Insiders sold stock recently, but they haven’t been buying. Looking to the last twelve months, our data doesn’t show any insider buying. But it is good to see that Canadian Pacific Railway is growing earnings. When you consider that most companies have higher levels of insider ownership, we’re a little wary. So we’re not rushing to buy, to say the least. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Canadian Pacific Railway. In terms of investment risks, we’ve identified 1 warning sign with Canadian Pacific Railway and understanding it should be part of your investment process.
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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.
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.
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