It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Enerplus Corporation (TSE:ERF), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Enerplus
Over the last year, we can see that the biggest insider purchase was by Senior VP & COO Wade Hutchings for CA$202k worth of shares, at about CA$4.05 per share. Even though the purchase was made at a significantly lower price than the recent price (CA$6.88), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Over the last year, we can see that insiders have bought 382.77k shares worth CA$1.0m. But insiders sold 193.00 shares worth CA$919. In the last twelve months there was more buying than selling by Enerplus insiders. Their average price was about CA$2.72. It is certainly positive to see that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Enerplus is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Enerplus Insiders Bought Stock Recently
It's good to see that Enerplus insiders have made notable investments in the company's shares. Specifically, Senior VP & CFO Jodine Labrie bought CA$97k worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.
Does Enerplus Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. From our data, it seems that Enerplus insiders own 0.4% of the company, worth about CA$6.4m. We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Enerplus Insiders?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Enerplus insiders are expecting a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Enerplus has 3 warning signs and it would be unwise to ignore these.
Of course Enerplus 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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