Should You Take Comfort From Insider Transactions At Capstead Mortgage Corporation (NYSE:CMO)?

By
Simply Wall St
Published
February 21, 2021
NYSE:CMO
Source: Shutterstock

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 before you buy or sell Capstead Mortgage Corporation (NYSE:CMO), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for Capstead Mortgage

The Last 12 Months Of Insider Transactions At Capstead Mortgage

Over the last year, we can see that the biggest insider purchase was by insider John Bernard for US$122k worth of shares, at about US$4.95 per share. That means that an insider was happy to buy shares at around the current price of US$5.67. 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 purchases were made at close to current prices.

In the last twelve months Capstead Mortgage insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NYSE:CMO Insider Trading Volume February 22nd 2021

Capstead Mortgage is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership of Capstead Mortgage

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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 2.5% of Capstead Mortgage shares, worth about US$14m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Capstead Mortgage Insider Transactions Indicate?

The fact that there have been no Capstead Mortgage insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders own shares in Capstead Mortgage and we see no evidence to suggest they are worried about the future. 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. To help with this, we've discovered 4 warning signs (3 are a bit concerning!) that you ought to be aware of before buying any shares in Capstead Mortgage.

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.

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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.
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