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We often see insiders buying up shares in companies that perform well over the long term. 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 Canadian National Railway Company (TSE:CNR), 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia 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'.
The Last 12 Months Of Insider Transactions At Canadian National Railway
In the last twelve months, the biggest single sale by an insider was when the , Matthew Barker, sold CA$2.0m worth of shares at a price of CA$99.83 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$122. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 30.2% of Matthew Barker's stake.
In the last twelve months insiders purchased 8815 shares for CA$968k. On the other hand they divested 104k shares, for CA$12m. In total, Canadian National Railway insiders sold more than they bought over the last year. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Canadian National Railway better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Canadian National Railway Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Canadian National Railway shares. In total, insiders dumped CA$2.5m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership of Canadian National Railway
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. Canadian National Railway insiders own about CA$142m worth of shares (which is 0.2% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Canadian National Railway Insider Transactions Indicate?
Insiders sold Canadian National Railway shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. Of course, the future is what matters most. So if you are interested in Canadian National Railway, 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.