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 before you buy or sell Concho Resources Inc (NYSE:CXO), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, including certain disclosures.
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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
Concho Resources Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Senior Vice President of Business Operations & Engineering J. Guthrie for US$1.7m worth of shares, at about US$137 per share. So we know that an insider sold shares at around the present share price of US$127. While their view may have changed since the sale, this is not a particularly positive fact. Arguably, insider selling at current prices should give us reason to reflect on whether the stock is fully valued at the moment.
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!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Concho Resources Have Sold Stock Recently
The last quarter saw substantial insider selling of Concho Resources shares. In total, insiders dumped US$3.1m worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Insider Ownership of Concho Resources
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Concho Resources insiders own about US$236m worth of shares (which is 0.9% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Concho Resources Insiders?
Insiders sold Concho Resources shares recently, but they didn’t buy any. Furthermore, transactions over the last twelve months dispel the notion that insiders won’t sell readily. But it is good to see that Concho Resources is growing earnings. When you combine this with the relatively low insider ownership, we are very cautious about the stock. As the saying goes, only fools rush in. 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.
But note: Concho Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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 firstname.lastname@example.org.