Caterpillar Inc. (NYSE:CAT) insiders sold US$2.9m worth of stock suggesting impending weakness.

Caterpillar Inc. (NYSE:CAT) insiders sold US$2.9m worth of stock suggesting impending weakness.

Updated: 2 days, 6 hours, 51 minutes, 51 seconds ago

The fact that multiple Caterpillar Inc. (NYSE:CAT) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Caterpillar

Caterpillar Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Chief Legal Officer & General Counsel, Suzette Long, sold US$897k worth of shares at a price of US$235 per share. That means that even when the share price was slightly below the current price of US$237, 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. This single sale was just 26% of Suzette Long's stake.

In total, Caterpillar insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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 Caterpillar Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Caterpillar. In total, Chief Legal Officer & General Counsel Suzette Long dumped US$447k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Does Caterpillar Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Caterpillar insiders own 0.2% of the company, worth about US$239m. 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 Do The Caterpillar Insider Transactions Indicate?

An insider sold Caterpillar shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. But it is good to see that Caterpillar is growing earnings. It is good to see high insider ownership, but the insider selling leaves us cautious. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For instance, we've identified 2 warning signs for Caterpillar (1 is a bit unpleasant) you should be aware of.

Of course Caterpillar 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. 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.

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