Stocks on the TSX with High Insider Ownership

Chris White Sep 03, 2019

At 5i Research, many of the companies we follow have high insider ownership. Of course, we like this attribute when it shows up along with other factors such as good management, a good track record of growing dividends and buying back shares, and a healthy balance sheet.  The appeal behind high insider ownership comes from the idea that insiders at a company, whether they are management, employees, executives, founders or even corporations is that they have more at stake. Because of this there is, in theory, a higher motivation from insiders for the company to perform well. This ultimately is positive for all shareholders alike. For this iteration of the 5i stock screener, we thought it would be interesting to screen for companies that have at least 5% insider ownership.

Return on Equity (ROE) and Insider Ownership 

One way to measure weather high insider ownership has positive effects on a company’s operations is to look at a measure like ROE which attempts to measure management effectiveness. This is by no means a silver bullet to interpreting the correlation between insider ownership and company operations but we think it provides some support to the idea of insider ownership.  Although not all companies with high insider ownership have high ROEs, many of them do. Notably ONEX, NPI, FSV and Colliers International Group Inc (CIGI) show twelve-month trailing ROEs of 68.2%, 36.8%, 28.8% and 26.3% respectively, making them definitely worth a closer look. We also observe many companies with high corporate insider ownership (as discussed above) but very low ROEs, like Choice Proper (CHP_U) and Cenovus Energy (CVE). Where we see higher ROEs are in companies with higher individual insider ownership which attests to the idea that having more skin in the game from individuals might lead to better results.  

Companies with high insider ownership have proven to do well in many instances which is why we thought screening for them would give us an interesting group of companies to dive deeper into. Although it is reflected as a percentage, the analysis of insider ownership is more qualitative and even subjective to a certain extent. We think it is worth giving attention and helpful in assessing motivation within the corporate structure. That said, we do not think it should form the basis of an investment thesis, rather it compliments other metrics and fundamentals nicely, provided they are there in the first place.  

A sample of the list is displayed below. For full access to the list, members can click here to log in or if you are not already a member, click here to join risk-free for 30 days (no credit card required).

Name Ticker Price ($) Company Market Cap ($)
GREAT-WST LIFE/d GWO.TO 29.82 27822910039.32
IMPERIAL OIL/d IMO.TO 37.13 28551828482.76
HUSKY ENERGY/d HSE.TO 11.85 12172024247.18
IGM FINANCIAL/d IGM.TO 37.74 8994357544.25
THOMSON REUTER/d TRI.TO 88.28 44400692094.40
POWER FIN CORP/d PWF.TO 29.75 19710384298.08
TRANSALTA RENE/d RNW.TO 13.9 3727128068.40
GENWORTH MI CA/d MIC.TO 44.63 3840397205.96
WESTON LTD/d WN.TO 100.63 15545778532.24
LOBLAW COS LTD/d L.TO 66.69 24677715652.50

Disclosure: Analysts at 5i Research cannot trade Canadian stocks.