Need To Know: Cadogan Petroleum plc (LON:CAD) Insiders Have Been Buying Shares

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 shareholders might well want to know whether insiders have been buying or selling shares in Cadogan Petroleum plc (LON:CAD).

What Is Insider Selling?

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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for Cadogan Petroleum

The Last 12 Months Of Insider Transactions At Cadogan Petroleum

In the last twelve months, the biggest single purchase by an insider was when CEO & Director Fady Khallouf bought UK£55k worth of shares at a price of UK£0.025 per share. That implies that an insider found the current price of UK£0.027 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. The good news for Cadogan Petroleum share holders is that an insider was buying at near the current price. Fady Khallouf was the only individual insider to buy during the last year.

Fady Khallouf bought 2.84m shares over the last 12 months at an average price of UK£0.025. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Cadogan Petroleum is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Does Cadogan Petroleum Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Cadogan Petroleum insiders own 41% of the company, currently worth about UK£2.7m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

What Might The Insider Transactions At Cadogan Petroleum Tell Us?

Insider purchases may have been minimal, in the last three months, but there was no selling at all. The net investment is not enough to encourage us much. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Cadogan Petroleum insiders think the business has merit. 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. Our analysis shows 3 warning signs for Cadogan Petroleum (1 shouldn't be ignored!) and we strongly recommend you look at these before investing.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

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.
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