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 we'll take a look at whether insiders have been buying or selling shares in Dye & Durham Limited (TSE:DND).
What Is Insider Buying?
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, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. 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'.
Dye & Durham Insider Transactions Over The Last Year
The insider, Tyler Proud, made the biggest insider sale in the last 12 months. That single transaction was for CA$8.0m worth of shares at a price of CA$21.00 each. That means that an insider was selling shares at slightly below the current price (CA$23.58). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 5.6% of Tyler Proud's stake.
Happily, we note that in the last year insiders paid CA$272k for 36.33k shares. On the other hand they divested 404.76k shares, for CA$8.5m. Over the last year we saw more insider selling of Dye & Durham shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insiders at Dye & Durham Have Sold Stock Recently
The last three months saw significant insider selling at Dye & Durham. In total, insiders sold CA$8.5m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Does Dye & Durham Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Dye & Durham insiders own 14% of the company, worth about CA$154m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Dye & Durham Tell Us?
Insiders sold Dye & Durham shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Every company has risks, and we've spotted 2 warning signs for Dye & Durham you should know about.
But note: Dye & Durham 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.
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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