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 shareholders might well want to know whether insiders have been buying or selling shares in Caterpillar Inc. (NYSE:CAT).
Do Insider Transactions Matter?
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 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.’
Caterpillar Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Group President of Services Bob De Lange bought US$125k worth of shares at a price of US$116 per share. That means that an insider was happy to buy shares at around the current price of US$119. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today’s share price, as the discount to value may have narrowed with the rising price. In this case we’re pleased to report that the insider bought shares at close to current prices. Bob De Lange was the only individual insider to buy over the year.
You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Does Caterpillar Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It appears that Caterpillar insiders own 0.1% of the company, worth about US$99m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Do The Caterpillar Insider Transactions Indicate?
The fact that there have been no Caterpillar insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don’t see anything to make us think Caterpillar insiders are doubting the company, and they do own shares. Of course, the future is what matters most. So if you are interested in Caterpillar, you should check out this free report on analyst forecasts for the company.
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.
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