In this time of market upheaval, are chief executive officers of large-cap Canadian companies stepping into the market and purchasing shares of their own depressed stocks?
Perhaps surprisingly, only a handful have been doing so this past month.
Of the 60 stocks in the S&P/TSX 60 index, only nine CEOs were buyers in the market in March, according to data reported on www.SEDI.ca as of March 31. This number could be higher if completed transactions have not yet been reported on the website. In cases where a company did not have an appointed CEO, the president’s trades were analyzed.
Overall, this number was quite low, representing just 15 per cent of stocks in the S&P/TSX 60 Index.
Interestingly, purchases in companies were well-represented across a number of sectors: three were in the Financials sector, two in Materials, and one purchase each in the Telecommunications, Industrials, Utilities and Energy sectors.
The CEOs of the S&P/TSX 60 listed companies who were buyers in the public market last month were from Canadian Imperial Bank of Commerce (CM-T), National Bank of Canada (NA-T), Power Corporation of Canada (POW-T), Nutrien Ltd. (NTR-T), Kirkland Lake Gold Ltd. (KL-T), BCE Inc. (BCE-T), Canadian Pacific Railway Ltd. (CP-T), Brookfield Infrastructure Partners (BIP-UN-T) and Cenovus Energy Inc. (CVE-T).
Purchase patterns were mixed. Multiple, or staggered, purchases were completed by five out of the nine CEOs, while four CEOs completed just one purchase during the month.
Most of these purchases by CEOs were relatively large: seven of the nine investments exceeded half a million dollars, and four of the nine investments surpassed $1-million (by CEOs from CP Rail, CIBC, National Bank of Canada, and Power Corp).
There were some sellers in the market. Seven CEOs unloaded shares, most of which were sales occurring after options were exercised.
Company leaders know their businesses and respective industries. Right now, during this time of uncertainty regarding future revenue and earnings, these business leaders have limited visibility.
Probably because of that, many CEOs from big firms are simply waiting things out after a month that saw the TSX 60 index of large-cap stocks fall 16 per cent. Some 73 per cent of CEOs of these large-cap stocks did not react and take any action in the public market.
Consider it a potential investing lesson from executive leaders who know their businesses well. It can be prudent to wait to invest, and there is no need to rush into stocks - even perceived high-quality stocks in the large cap space right now.