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 Cannasouth Limited (NZSE:CBD).
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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’.
Cannasouth Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the insider, Adam Sorensen, sold NZ$863k worth of shares at a price of NZ$0.66 per share. That means that an insider was selling shares at slightly below the current price (NZ$1.07). 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. 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 only 17% of Adam Sorensen’s holding.
Over the last year we saw more insider selling of Cannasouth shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It’s great to see that Cannasouth insiders own 57% of the company, worth about NZ$74m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Cannasouth Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. While we feel good about high insider ownership of Cannasouth, we can’t say the same about the selling of shares. 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. For example, Cannasouth has 5 warning signs (and 1 which shouldn’t be ignored) we think you should know about.
But note: Cannasouth 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.
If you decide to trade Cannasouth, 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.
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 firstname.lastname@example.org.