It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Northland Power Inc. (TSE:NPI).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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’.
The Last 12 Months Of Insider Transactions At Northland Power
The Chairman of the Board, James Temerty, made the biggest insider sale in the last 12 months. That single transaction was for CA$863m worth of shares at a price of CA$23.35 each. That means that an insider was selling shares at slightly below the current price (CA$26.06). 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. We note that the biggest single sale was 65% of James Temerty’s holding.
In total, Northland Power insiders sold more than they bought over the last year. The chart below shows insider transactions (by 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!
I will like Northland Power better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Northland Power Insiders Bought Stock Recently
It’s good to see that Northland Power insiders have made notable investments in the company’s shares. We can see that CEO & President Mike Crawley paid CA$100k for shares in the company. No-one sold. This makes one think the business has some good points.
Insider Ownership of Northland Power
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. Northland Power insiders own 12% of the company, currently worth about CA$569m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Northland Power Insider Transactions Indicate?
It’s certainly positive to see the recent insider purchase. However, the longer term transactions are not so encouraging. The high levels of insider ownership, and the recent buying by an insider , suggests they are well aligned and optimistic. 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.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.