Should You Take Comfort From Insider Transactions At Caledonia Investments plc (LON:CLDN)?

We often see insiders buying up shares in companies that perform well over the long term. 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 Caledonia Investments plc (LON:CLDN).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 it is perfectly logical to keep tabs on what insiders are doing. 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'.

View our latest analysis for Caledonia Investments

Caledonia Investments Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Head of Funds Pool & Executive Director James Michael Cayzer-Colvin for UK£293k worth of shares, at about UK£26.40 per share. So it's clear an insider wanted to buy, at around the current price, which is UK£27.70. Of course they may have changed their mind. But this suggests they are optimistic. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider bought shares at close to current prices. The only individual insider to buy over the last year was James Michael Cayzer-Colvin. Notably James Michael Cayzer-Colvin was also the biggest seller.

James Michael Cayzer-Colvin bought 12.09k shares over the last 12 months at an average price of UK£26.34. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

Caledonia Investments is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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 Caledonia Investments insiders own 1.1% of the company, worth about UK£16m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Caledonia Investments Insider Transactions Indicate?

The fact that there have been no Caledonia Investments insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Caledonia Investments insiders are doubting the company, and they do own shares. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Caledonia Investments. To help with this, we've discovered 3 warning signs (2 are significant!) that you ought to be aware of before buying any shares in Caledonia Investments.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

If you decide to trade Caledonia Investments, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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