Need To Know: Codan Limited (ASX:CDA) Insiders Have Been Selling Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Codan Limited (ASX:CDA), you may well want to know whether insiders have been buying or selling.

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, 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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

Check out our latest analysis for Codan

Codan Insider Transactions Over The Last Year

The MD, CEO & Executive Director, Donald McGurk, made the biggest insider sale in the last 12 months. That single transaction was for AU$2.5m worth of shares at a price of AU$18.33 each. That means that an insider was selling shares at slightly below the current price (AU$19.33). 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. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 18% of Donald McGurk's holding. Donald McGurk was the only individual insider to sell shares in the last twelve months.

You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

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Codan Insiders Are Selling The Stock

The last three months saw significant insider selling at Codan. In total, MD, CEO & Executive Director Donald McGurk dumped AU$2.5m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership of Codan

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Codan insiders own 44% of the company, currently worth about AU$1.5b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Codan Insider Transactions Indicate?

An insider hasn't bought Codan stock in the last three months, but there was some selling. And there weren't any purchases to give us comfort, over the last year. But it is good to see that Codan is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Codan. Case in point: We've spotted 1 warning sign for Codan you should be aware of.

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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.

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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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