Insiders At Hammond Power Solutions Sold CA$66m In Stock, Alluding To Potential Weakness

In the last year, many Hammond Power Solutions Inc. (TSE:HPS.A) insiders sold a substantial stake in the company which may have sparked shareholders' attention. Knowing whether insiders are buying is usually more helpful when evaluating insider transactions, as insider selling can have various explanations. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At Hammond Power Solutions

The Chair of the Board, William Hammond, made the biggest insider sale in the last 12 months. That single transaction was for CA$66m worth of shares at a price of CA$131 each. So what is clear is that an insider saw fit to sell at around the current price of CA$127. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).

Happily, we note that in the last year insiders paid CA$374k for 3.80k shares. But insiders sold 502.33k shares worth CA$66m. Over the last year we saw more insider selling of Hammond Power Solutions shares, than buying. They sold for an average price of about CA$131. It's not particularly great to see insiders were selling shares at below recent prices. But we wouldn't put too much weight on the insider selling. 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!

See our latest analysis for Hammond Power Solutions

I will like Hammond Power Solutions better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insiders At Hammond Power Solutions Have Sold Stock Recently

We have seen a bit of insider selling at Hammond Power Solutions, over the last three months. Chief Operations Officer John Bailey sold just CA$38k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn't sufficiently substantial to be of much use as a signal.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Hammond Power Solutions insiders own about CA$416m worth of shares (which is 27% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Hammond Power Solutions Tell Us?

We did not see any insider buying in the last three months, but we did see selling. But given the selling was modest, we're not worried. While we feel good about high insider ownership of Hammond Power Solutions, we can't say the same about the selling of shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Hammond Power Solutions.

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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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.