Insiders Are Buying These Companies Ahead of Earnings: Should You?

Follow the insiders of First Quantum Minerals Limited (TSX:FM), Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY), and Shaw Communications Inc (TSX:SJR.B)(NYSE:SJR) to profit.

| More on:

Studies have shown that following insider buying can lead to market-beating returns. After all, what better way is there from management or members of the board to show faith in their companies than buying the shares? Below are a few Canadian names whose insiders have been noticeably bullish in the last three months going into their quarterly earnings.

First Quantum Minerals Limited (TSX:FM)

Catalyst: Q3 earnings on October 28.

Those expecting a turnaround for First Quantum are not alone.

It would appear that the company’s insiders bought into the struggling miner’s improving financials following its second-quarter earnings report. For Q2 2016, First Quantum seemed to have taken the right steps to bolster its balance sheet, reporting $895 million unrestricted cash, $593 million in undrawn facilities, and $553 million of working capital.

Near-term growth drivers for the company also include the completion of a $2.5 billion financing deal for the Cobre Panama project in late 2016 and early 2017, along with additional sales of non-core assets to further increase its liquidity.

Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY)

Upcoming catalyst: Q3 earnings on November 2

Brookfield’s strong dividend growth and excellent balance sheet have clearly not gone unnoticed by its insiders, who were also no doubt drawn to the stock’s discount (albeit fast closing) to its net asset value (NAV) of US$29.50. Insiders were not the only ones after Brookfield’s well-diversified portfolio of international real estate properties; institutional ownership for the LP increased to 73.3%, as per the latest SEC filings.

Shaw Communications Inc (TSX:SJR.B)(NYSE:SJR)

Upcoming catalyst: Q4 earnings, November 2

Utilities such as Shaw have been big favourites of income investors, as low interest rates are expected to persist in Canada for the foreseeable future. Shaw in particular is popular with the company’s insiders most likely due to the growth opportunities presented by its new direction as a mobile carrier.

Shaw is currently set to do battle with incumbent carrier Telus Corporation in western Canada, and analysts will be paying close attention to the company’s wireless metrics such as net users added, average revenue per user, and wireless margins. But, if it’s any indication, Shaw’s insiders seem to be quite bullish about its foray into the mobile arena.

insider-cropped
Canadian companies showing most insider buys in the last three months. Based on Bloomberg data

The bottom line

Tracking insider activity can be one of the most fruitful aspects of the security analysis process. While it should not be the primary factor regarding a stock purchase, knowing that you are investing along with the insiders of a company can offer a reassuring sentiment for your bullish thesis.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Alexander John Tun has no position in any stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »