We often see insiders buying up shares in companies that perform well over the long term. 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 Transocean Ltd. (NYSE:RIG).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 it is perfectly logical to keep tabs on what insiders are doing. 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.
See our latest analysis for Transocean
Transocean Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Executive VP and Chief Administrative Officer & Information Officer Howard Davis for US$623k worth of shares, at about US$6.35 per share. That means that an insider was happy to buy shares at above the current price of US$5.63. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels. Notably Howard Davis was also the biggest seller.
In the last twelve months insiders purchased 150849 shares for US$932k. But they sold 163559 for US$1.1m. Howard Davis ditched 163559 shares over the year. The average price per share was US$6.64. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does Transocean Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It’s great to see that Transocean insiders own 5.7% of the company, worth about US$169m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Transocean Insider Transactions Indicate?
The fact that there have been no Transocean insider transactions recently certainly doesn’t bother us. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Transocean insiders selling. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course Transocean 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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