Some Caterpillar Inc. (NYSE:CAT) shareholders may be a little concerned to see that the Chief Financial Officer, Andrew R. Bonfield, recently sold a substantial US$4.1m worth of stock at a price of US$405 per share. That sale reduced their total holding by 15% which is hardly insignificant, but far from the worst we've seen.
Caterpillar Insider Transactions Over The Last Year
Notably, that recent sale by Chief Financial Officer Andrew R. Bonfield was not the only time they sold Caterpillar shares this year. They previously made an even bigger sale of -US$6.4m worth of shares at a price of US$333 per share. That means that even when the share price was below the current price of US$404, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 30% of Andrew R. Bonfield's holding.
In the last twelve months insiders purchased 1.05k shares for US$351k. But they sold 49.96k shares for US$17m. Over the last year we saw more insider selling of Caterpillar shares, than buying. 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!
For those who like to find hidden gems this free list of small cap companies with recent insider purchasing, could be just the ticket.
Does Caterpillar Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Caterpillar insiders own about US$381m 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 Does This Data Suggest About Caterpillar Insiders?
Unfortunately, there has been more insider selling of Caterpillar stock, than buying, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Caterpillar is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 3 warning signs for Caterpillar (1 is a bit unpleasant!) that we believe deserve your full attention.
But note: Caterpillar may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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 of direct interests only, but not derivative transactions or indirect interests.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
