Sorry, I forgot to add the first part of the quote. The website that I copied it (https://www.quoteswise.com/peter-lynch-quotes.html) from didn't consider it important and neither did I. Nevertheless, the full quote goes something like "Insiders sell for many reasons; the insider has only one reason to buy: to make money."
Without knowing the cost basis for the restricted shares, it is difficult to know how much money the CEO actually made. What is important is what he did with those funds. He could of bought (insert Joe454's favourite stock here). He could of gone to Las Vegas and hired a room full of prostitutes with money left over to but antibiotics to cure the resultant STDs. He could of bought bank stocks. He could of asked his financial advisor about what to do with the money and be told that the last thing to do is to put the money into the company that employs him. The risk is very high; if the company folds, not only does he lose his job, he also loses his investment.
So what does he do? He invests the money into PLT.UN.
For the past few years I've been downloading the weekly summary of insider trading from Sedi.ca (an excellent site, one of the few things the government has done right). There is lots of selling, mostly options related, but very little insider buying and even less of insiders buying substantial amounts of stock. One of the rare examples is Automodular. In 2009, the CEO bought huge amounts. Now, three years later in 2012, he is selling just as much. Why is he selling? I dunno, maybe he's got a weekend planned in Las Vegas. Maybe he is planning to buy (insert your favourite stock here). It's unimportant.
What was important back in 2009 is that he was buying and buying big. Those that follow insider buying and bought with him back then and held until now made out big time and with the current yield are still making it big.
There are a few other examples, very few as this kind of buying is very rare, and PLT.UN is one of them.
Will Parallel Energy follow the same path and reward current shareholders in 2015? It's hard to say, but knowing that the CEO and other insiders have put a significant amount of their money into the company mitigates the risk. Also, waiting isn't that hard when the dividend yield is 20%.
But what if the dividend gets cut? The long term average return on stock investments is 7%. Even if the dividend is cut in half, the yield is still 50% higher than the long term average.
Peter Lynch was one of the all time best mutual fund managers. He regularly beat the market with annual returns of 20% or more. Surprisingly, his clients did very poorly. Why? When the fund went up, they bought. When the fund went down, they sold. Instead of hanging on, they bought high, and sold low. Great way to lose money.
On my previous post, I foolishly set my recommendation as strong buy and have changed it to sell. I have dividends coming in later this month and would really like it if others sell. I'll willingly sacrifice for the greater good and take those near worthless shares off your hands.