In the last year, many Caterpillar Inc. (NYSE:CAT) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, if numerous insiders are selling, shareholders should investigate more.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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$4.1m worth of shares, at about US$407 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of US$307. So it may not tell us anything about how insiders feel about the current share price.

Happily, we note that in the last year insiders paid US$315k for 900.00 shares. But insiders sold 32.38k shares worth US$12m. In total, Caterpillar insiders sold more than they bought over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Check out our latest analysis for Caterpillar

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Caterpillar Insiders Are Selling The Stock

There was substantially more insider selling, than buying, of Caterpillar shares over the last three months. We note insider Jason Kaiser cashed in US$860k worth of shares. Meanwhile Independent Director Gerald Johnson bought US$37k worth. The share price has moved a bit recently, but it's hard to argue that the selling is a positive.

Does Caterpillar Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Caterpillar insiders own about US$305m worth of shares (which is 0.2% of the company). 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?

The stark truth for Caterpillar is that there has been more insider selling than insider buying in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Caterpillar is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Every company has risks, and we've spotted 1 warning sign for Caterpillar 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.

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

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.