Possible Bearish Signals With Fortis Insiders Disposing Stock

The fact that multiple Fortis Inc. (TSE:FTS) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Fortis

Fortis Insider Transactions Over The Last Year

The insider, James Laurito, made the biggest insider sale in the last 12 months. That single transaction was for CA$1.4m worth of shares at a price of CA$61.17 each. That means that an insider was selling shares at slightly below the current price (CA$63.44). 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was 54% of James Laurito's holding.

In the last twelve months insiders purchased 19.23k shares for CA$1.2m. But they sold 24.02k shares for CA$1.5m. All up, insiders sold more shares in Fortis than they bought, over the last year. 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!

I will like Fortis 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.

Fortis Insiders Bought Stock Recently

Over the last three months, we've seen significant insider buying at Fortis. Not only was there no selling that we can see, but they collectively bought CA$903k worth of shares. This is a positive in our book as it implies some confidence.

Does Fortis 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Fortis insiders own 0.1% of the company, worth about CA$33m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At Fortis Tell Us?

The recent insider purchases are heartening. However, the longer term transactions are not so encouraging. The more recent transactions are a positive, but Fortis insiders haven't shown the sustained enthusiasm that we look for, although they do own a decent number of shares, overall. In short they are likely aligned with shareholders. 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, Fortis has 2 warning signs (and 1 which can't be ignored) we think you should know about.

But note: Fortis 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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.