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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

The Last 12 Months Of Insider Transactions At Caterpillar

Over the last year, we can see that the biggest insider sale was by the Chief Financial Officer, Andrew R. Bonfield, for US$6.4m worth of shares, at about US$333 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$363. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 30% of Andrew R. Bonfield's stake.

Over the last year we saw more insider selling of Caterpillar shares, than buying. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like Caterpillar better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insiders At Caterpillar Have Bought Stock Recently

It's good to see that Caterpillar insiders have made notable investments in the company's shares. We can see that Independent Director David MacLennan paid US$282k for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.

Does Caterpillar Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Caterpillar insiders own 0.2% of the company, worth about US$340m. 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 Caterpillar Tell Us?

It is good to see the recent insider purchase. On the other hand the transaction history, over the last year, isn't so positive. The high levels of insider ownership, and the recent buying by an insider suggests they are well aligned and optimistic. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Caterpillar. For example, Caterpillar has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.