One of the benefits of Canada’s System for Electronic Disclosure by Insiders is the reporting of company share buybacks, also known as normal course issuer bids. When issuers buy back shares in the public market, they generally have until the 10th day of the following month to report their transactions, although many companies file their reports within a day or two.
In June, the top 100 Canadian issuers with buybacks by dollar amount spent just over $5.6-billion repurchasing shares based on data compiled by INK Research. The top 10 accounted for more than half of the total with just over $3.7-billion in reported repurchases.
Probably the most common reason cited by management for implementing share buybacks is the belief that the share price is not fully reflecting the company’s financial prospects. However, the assumption of share price undervaluation could use some scrutiny given that there may be competing factors driving buyback decisions, such as helping to offset share count dilution associated with company stock option plans.
I have a greater conviction that a company is buying back undervalued shares if company insiders are also buying shares with their own cash or at least holding on to what they have. It is difficult to accept the notion that a stock is undervalued if insiders are taking significant profits in their personal holdings while a share buyback program is underway.
Our INK Edge outlook framework ranks a stock’s insider net buying and holdings along with its valuations and price momentum. Using our criteria, stocks with sunny or mostly sunny INK Edge outlooks would be in the top 30 per cent of all stocks ranked. Firms undertaking buybacks that have relatively bright INK Edge outlooks would provide us greater confidence that the stock is underpriced.
In terms of the top 10 issuers with buybacks, AtkinsRéalis Group Inc., Toronto-Dominion Bank, Bank of Montreal and Barrick Mining Corp. all have mostly sunny INK Edge outlooks. Engineering firm AtkinsRéalis has had a nice run over the past 12 months, up 70.6 per cent as of July 11. During the rally, insiders did not sell any stock in the public market. Sometimes what insiders don’t do is as important as what they do.
After a tough 2024 when TD Bank stock dropped 10.6 per cent, the bank’s shares have fared better so far this year, rallying 31.6 per cent as of July 11. Year-to-date, TD Bank insiders have spent a net of $1.1-million acquiring shares via a combination of option exercises or public market transactions. That is helping to keep the name competitive in our rankings.
Bank of Montreal is also competitive despite a relatively small amount of insider selling worth $890,984 net of option exercise costs since the start of the year. The stock has rallied 11.5 per cent in 2025 as of July 11.
In contrast, insiders at buyback leader Royal Bank of Canada have been sellers of $13.2-million worth of stock, net of option exercise costs.
Royal Bank has outperformed TD Bank and the S&P/TSX Composite Index over the past five years, but TD Bank is leading both the Royal Bank and the Canadian market year-to-date. Meanwhile, the case for continued TD Bank outperformance over the next year is strengthened by seeing insider activity aligned with the bank’s buyback program.
Ted Dixon is CEO of INK Research which provides insider news and knowledge to investors.