In This Article:
It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Cape Range Limited (ASX:CAG), you may well want to know whether insiders have been buying or selling.
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. For example, a Colombia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
Check out our latest analysis for Cape Range
Cape Range Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when Independent Non-Executive Chairman Wayne Johnson sold AU$91k worth of shares at a price of AU$1.51 per share. So it’s clear an insider wanted to take some cash off the table, even below the current price of AU$1.62. While their view may have changed since they sold, this isn’t a particularly bullish sign. As a general rule we consider it to be discouraging when insiders are selling below the current price. It is worth noting that this sale was only 19.8% of Wayne Johnson’s holding. The only individual insider seller over the last year was Wayne Johnson.
Wayne Johnson divested 110.28k shares over the last 12 months at an average price of AU$1.51. The chart below shows insider transactions over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Cape Range insiders own 20% of the company, currently worth about AU$27m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.