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Read This Before Selling Linamar Corporation (TSE:LNR) Shares

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 we'll take a look at whether insiders have been buying or selling shares in Linamar Corporation (TSE:LNR).

Do Insider Transactions Matter?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.

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'.

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See our latest analysis for Linamar

Linamar Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when CTO, Executive VP of Sales & Marketing and Non-Independent Director Mark Stoddart bought CA$6.1m worth of shares at a price of CA$45.38 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being CA$39.39). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

Over the last year, we can see that insiders have bought 207.49k shares worth CA$9.2m. But they sold 38.80k shares for CA$1.2m. In the last twelve months there was more buying than selling by Linamar insiders. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
insider-trading-volume

Linamar 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.

Insiders at Linamar Have Bought Stock Recently

We saw some Linamar insider buying shares in the last three months. Insiders purchased CA$42k worth of shares in that period. We like it when there are only buyers, and no sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.

Insider Ownership

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. A high insider ownership often makes company leadership more mindful of shareholder interests. It's great to see that Linamar insiders own 33% of the company, worth about CA$844m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Linamar Tell Us?

Insider purchases may have been minimal, in the last three months, but there was no selling at all. That said, the purchases were not large. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Linamar insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for 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. In terms of investment risks, we've identified 1 warning sign with Linamar and understanding this should be part of your investment process.

But note: Linamar 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, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.