Insiders At Caterpillar Sold US$17m In Stock, Alluding To Potential Weakness

Over the past year, many Caterpillar Inc. (NYSE:CAT) insiders sold a significant stake in the company which may have piqued investors' interest. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Caterpillar

Caterpillar Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the Chief Financial Officer, Andrew R. Bonfield, for US$6.4m worth of shares, at about US$333 per share. That means that even when the share price was below the current price of US$361, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 30% of Andrew R. Bonfield's holding.

In the last twelve months insiders purchased 1.15k shares for US$391k. But insiders sold 49.96k shares worth US$17m. Over the last year we saw more insider selling of Caterpillar shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Caterpillar Insiders Are Selling The Stock

We've seen more insider selling than insider buying at Caterpillar recently. In total, insiders sold US$5.6m worth of shares in that time. On the other hand we note Independent Director Gerald Johnson bought US$40k worth of shares. The share price has moved a bit recently, but it's hard to argue that the selling is a positive.

Does Caterpillar Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Caterpillar insiders own 0.2% of the company, currently worth about US$333m 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.

What Might The Insider Transactions At Caterpillar Tell Us?

The stark truth for Caterpillar is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Caterpillar is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Caterpillar. Case in point: We've spotted 2 warning signs for Caterpillar you should be aware of.

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 of direct interests only, but not derivative transactions or indirect interests.

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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.