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 Paramount Resources Ltd. (TSE:POU).
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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.’
Check out our latest analysis for Paramount Resources
Paramount Resources Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Clayton Riddell for CA$133m worth of shares, at about CA$14.13 per share. That means that even when the share price was higher, an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. That purchase may suggest an expectation of positive returns over the long term. Notably Clayton Riddell was also the biggest seller, having sold CA$7.4m worth of shares.
Happily, we note that in the last year insiders paid CA$140m for 9.87m shares. On the other hand they divested 526.09k shares, for CA$7.4m. In the last twelve months there was more buying than selling by Paramount Resources insiders. Their average price was about CA$14.19. This is nice to see since it implies that insiders might see value around current prices (around CA$5.82). You can see a visual depiction of insider transactions over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Paramount Resources is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Paramount Resources Insiders Bought Stock Recently
At Paramount Resources,over the last quarter, we have observed quite a lot more insider buying than insider selling. Insiders spent CA$178k on shares. But Vice President of Grande Prairie Joerg Wittenberg sold shares worth CA$11k. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
Insider Ownership
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that Paramount Resources insiders own 2.1% of the company, worth about CA$16m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Paramount Resources Insider Transactions Indicate?
The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. However, we note that the company didn’t make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest Paramount Resources insiders are well aligned, and that they may think the share price is too low. Of course, the future is what matters most. So if you are interested in Paramount Resources, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.