If top-level insiders are selling company stock, it can pay to approach the stock with caution. Insider sales can be a sign that the stock is overvalued.
Here, we are going to highlight a large insider sale at Clipper Logistics PLC (CLG:LN). Clipper is a UK-based logistics company that serves e-commerce companies. Its services include e-fulfilment, returns management, and central logistics. The company is listed on the London Stock Exchange and currently has a market capitalization of £583 million.
Clipper Logistics: Director Dealing
PDMR filings show that on 15 January, Clipper’s Executive Steven Parkin sold 11 million shares at a price of 565p per share. This sale – which netted the insider approximately £62 million – reduced his holding from 25.1 million shares to 14.1 million shares.
This director deal stands out due to its size. Not only is it large in monetary terms, but it is also large in relative terms – it has reduced the size of Parkin’s position by 44%. Our Insider Model views this trade as bearish.
Additionally, Parkin – who founded Clipper in 1992 – has a good track record when it comes to the timing of his trades. The last time he made a large sale, on 24 January 2018, the stock fell 42% over the next year.
Share Price RiseClipper has posted strong trading updates recently. On 6 January, for example, the company advised that it had experienced unprecedented levels of activity in its logistics operations in both the UK and continental Europe over the Black Friday and Christmas periods. It also said that for the months of November and December, revenues in its logistics business were 50% higher than in the corresponding period of the prior year, with strong growth in both e-commerce related activities and non e-fulfilment services.
As a result of these trading updates, Clipper’s share price has moved significantly higher. Back in March 2020, the stock was trading near 150p. However, this year, it has risen as high as 650p. That represents a gain of about 333%. As a result of this share price rise, the stock now trades on a forward-looking P/E ratio of 26.
It appears that the Chairman believes that now is a good time to take some profits off the table. Given the size of the sale, and Parkin’s track record, we think caution is warranted towards the stock right now.