It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Héroux-Devtek Inc. (TSE:HRX).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. 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'.
Héroux-Devtek Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Executive Chairman of the Board, Gilles Labbé, for CA$1.5m worth of shares, at about CA$15.35 per share. That means that an insider was selling shares at slightly below the current price (CA$16.25). 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. It is worth noting that this sale was only 2.6% of Gilles Labbé's holding. Gilles Labbé was the only individual insider to sell over the last year.
In the last twelve months insiders purchased 17.80k shares for CA$174k. But insiders sold 100.00k shares worth CA$1.5m. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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Does Héroux-Devtek Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Héroux-Devtek insiders own 11% of the company, worth about CA$69m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Héroux-Devtek Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of Héroux-Devtek insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. 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. For example - Héroux-Devtek has 1 warning sign we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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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