It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in SM Energy Company (NYSE:SM).
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.
SM Energy Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Independent Director Julio Quintana for US$80k worth of shares, at about US$2.00 per share. We do like to see buying, but this purchase was made at well below the current price of US$4.63. Because it occurred at a lower valuation, it doesn’t tell us much about whether insiders might find today’s price attractive.
In the last twelve months SM Energy insiders were buying shares, but not selling. Their average price was about US$3.77. It’s great to see insiders putting their own cash into the company’s stock, albeit at below the recent share price. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of SM Energy
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. Our data indicates that SM Energy insiders own about US$8.2m worth of shares (which is 1.6% of the company). We do generally prefer see higher levels of insider ownership.
So What Do The SM Energy Insider Transactions Indicate?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. But insiders have shown more of an appetite for the stock, over the last year. We’d like to see bigger individual holdings. However, we don’t see anything to make us think SM Energy insiders are doubting the company. While we like knowing what’s going on with the insider’s ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. At Simply Wall St, we found 2 warning signs for SM Energy that deserve your attention before buying any shares.
Of course SM Energy may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.