We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in The Colonial Motor Company Limited (NZSE:CMO).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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.
The Last 12 Months Of Insider Transactions At Colonial Motor
In the last twelve months, the biggest single purchase by an insider was when Director Stuart Gibbons bought NZ$137k worth of shares at a price of NZ$5.56 per share. That means that an insider was happy to buy shares at around the current price of NZ$6.70. That means they have been optimistic about the company in the past, though they may have changed their mind. 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 purchases were made at close to current prices.
While Colonial Motor insiders bought shares during the last year, they didn't sell. You can see the insider transactions (by 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!
Colonial Motor is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Colonial Motor Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Colonial Motor. Overall, two insiders shelled out NZ$413k for shares in the company -- and none sold. This makes one think the business has some good points.
Does Colonial Motor Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Colonial Motor insiders own about NZ$146m worth of shares (which is 66% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Colonial Motor Insider Transactions Indicate?
It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Colonial Motor. Looks promising! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Colonial Motor. While conducting our analysis, we found that Colonial Motor has 2 warning signs and it would be unwise to ignore these.
Of course Colonial Motor may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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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