A good way to gage management sentiment is to analyse insider trading activity. Are insiders buying up shares or are they dumping them and subsequently reducing their positions.
Although insiders can sell for a wide-variety of reasons, consistent selling could be a bearish indicator. This is especially true if the sells outweigh the number of buys.
The other important aspect to remember is that not all insider trading should be treated equal. Part of the problem with several software programs such as Simply Wall St., is that they treat all activity equally. This can over-inflate management sentiment.
The only trades that should matter to you, are those on the open market. Those that are not attached to any options or grants. With that in mind here are a few companies whose insiders are dumping shares on the open market.
Air Canada (AC.TO)
Over the past six months, there have been approximately a dozen insider sells at Air Canada (TSX:AC). Half of these have been dispositions onto the open market.
Last week, Calin Rovinescu, President and CEO sold 1.27 million shares for total proceeds of approximately $56 million dollars. I had to double-check these numbers, as that is a fairly hefty disposition.
Is this the start of a new trend? It will be worth monitoring insider trades at Air Canada over the next month as it has hit new 52-week highs for most of the year.
As the price of gold has rebounded, so too have gold miners. As gold stocks awaken from their multi-year slumps, it is not surprising to see insiders take advantage.
At Centerra Gold (TSX:CG) we are starting to see insiders reduce their positions.. Just yesterday, Gordon Reid, VP and Chief Operation Officer lightened his holdings by 101,648 shares for gross proceeds of just over $1 million.
Similar to Air Canada, there have been no insider buys on the open market.
A trend worth monitoring
Although recent dispositions by top-level executives is not a reason to rush out and dump your positions, it worth keeping an eye one.
Both Air Canada and Centerra Gold have enjoyed a phenomenal 2019. As of writing, Centerra is up 90% year to date and Air Canada’s stock has jumped 70% thus far.
Trading near multi-year highs it is possible that management is being opportunistic and taking money off the table after years of underperfomance. I don’t blame them.
If however, it is the start of a trend it could be a worrying sign.