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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. 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 Constellation Software Inc. (TSE:CSU).
What Is Insider Selling?
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 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 Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
See our latest analysis for Constellation Software
Constellation Software Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Lead Independent Director Stephen Scotchmer for CA$6.4m worth of shares, at about CA$928 per share. That means that an insider was happy to buy shares at around the current price. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. In any event it’s generally a positive if insiders are buying shares at around the current price. Notably Stephen Scotchmer was also the biggest seller, having sold CA$12m worth of shares.
In the last twelve months insiders purchased 8.51k shares for CA$7.9m. But insiders sold 13.14k shares worth CA$12m. In total, Constellation Software insiders sold more than they bought over the last year. The sellers received a price of around US$933, on average. We don’t gain confidence from insider selling below the recent share price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Constellation Software Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Constellation Software shares over the last three months. In that time, insiders dumped US$9.0m worth of shares. On the other hand we note Lead Independent Director Stephen Scotchmer bought US$7.7m worth of shares. Generally this level of net selling might be considered a bit bearish.
Insider Ownership of Constellation Software
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Constellation Software insiders own about CA$1.5b worth of shares (which is 7.1% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Constellation Software Insiders?
The insider sales have outweighed the insider buying, at Constellation Software, in the last three months. Despite some insider buying, the longer term picture doesn’t make us feel much more positive. On the plus side, Constellation Software makes money, and is growing profits. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Constellation Software may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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 editorial-team@simplywallst.com.