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 City Office REIT, Inc. (NYSE:CIO), 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, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year’.
City Office REIT Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when CEO & Director James Farrar bought US$86k worth of shares at a price of US$7.48 per share. We do like to see buying, but this purchase was made at well below the current price of US$10.96. Because it occurred at a lower valuation, it doesn’t tell us much about whether insiders might find today’s price attractive.
City Office REIT insiders may have bought shares in the last year, but they didn’t sell any. You can see the insider transactions (by companies and 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!
City Office REIT is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of City Office REIT
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. We usually like to see fairly high levels of insider ownership. It appears that City Office REIT insiders own 2.5% of the company, worth about US$12m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At City Office REIT Tell Us?
The fact that there have been no City Office REIT insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in City Office REIT and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. To that end, you should learn about the 2 warning signs we’ve spotted with City Office REIT (including 1 which is potentially serious).
Of course City Office REIT 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.
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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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