Q: Four members of Bell Canada’s board of directors took advantage of the telecom giant’s stock drop to buy shares. CEO Mirko Bibic purchased shares worth just over $200,000, while Louis Vachon, former CEO of National Bank, acquired shares worth nearly $390,000. Calin Rovinescu, former CEO of Air Canada, invested close to $350,000, and Jennifer Tory, a former vice-president at RBC, over $170,000.. They must see future potential gains in the share price since the only reason to buy shares of a company is to make gains.
5i Research Answer:
Certainly insiders buy for only one reason. However, it does not guarantee success. Once or twice in our career we have seen insiders at some companies buy weeks before a bankruptcy filing. But it is certainly a positive sign. Most well-off investors can borrow money at far less than the 10.6% dividend offered, and interest is tax deductable. So these purchases could be 'income' bets but are good to see regardless.