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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Caledonia Investments plc (LON:CLDN), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
We don't think shareholders should simply follow insider transactions. 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'.
Caledonia Investments Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Head of Funds Pool & Executive Director James Michael Cayzer-Colvin for UK£293k worth of shares, at about UK£26.40 per share. That implies that an insider found the current price of UK£27.00 per share to be enticing. That means they have been optimistic about the company in the past, though they may have changed their mind. 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. Happily, the Caledonia Investments insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was James Michael Cayzer-Colvin. Notably James Michael Cayzer-Colvin was also the biggest seller.
James Michael Cayzer-Colvin purchased 12.09k shares over the year. The average price per share was UK£26.34. You can see the insider transactions (by companies and 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!
Caledonia Investments 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.
Does Caledonia Investments 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. Insiders own 1.1% of Caledonia Investments shares, worth about UK£16m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Caledonia Investments Tell Us?
The fact that there have been no Caledonia Investments insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Caledonia Investments insiders are doubting the company, and they do own shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. At Simply Wall St, we've found that Caledonia Investments has 3 warning signs (2 are potentially serious!) that deserve your attention before going any further with your analysis.
Of course Caledonia Investments 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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