Shell Midstream Partners, L.P. owns, operates, develops, and acquires pipelines and other midstream assets in the United States. Shell Midstream Partners is one of United States’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in 5.00k shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. But these signals may not be sufficient to gain confidence on whether to invest. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
View our latest analysis for Shell Midstream Partners
Who Are Ramping Up Their Shares?
More shares have been bought than sold by Shell Midstream Partners insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 0.047% of total shares outstanding.
Insiders that have recently ramped up their holdings are:| Name | Management | Board | Total Annual Compensation |
|---|---|---|---|
| Curtis Fraiser |
Is This Consistent With Future Growth?
On the surface, analysts’ earnings growth projection of 53.3% over the next three years provides a strong outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates, analysts anticipate a healthy double-digit top-line growth next year, which seems to drive higher expected earnings growth as well. This is potentially an outcome of successful growth initiatives in place and strong cost controls, leading to sustainable operations. If insiders recognised this, a signal of their confidence may be their higher shareholdings in the company. Or they may simply view the share price is currently too low compared to the share’s intrinsic value.
Did Stock Price Volatility Instigate Buying?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Within the past three months, Shell Midstream Partners’s share price traded at a high of $24 and a low of $21.68. This suggests an immaterial change in share price, with a movement of 10.7%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal portfolio rebalancing.
Next Steps:
Shell Midstream Partners’s insider meaningful buying activity tells us the shares are currently in favour, coherent with the sizeable growth in expected earnings, though share price volatility was perhaps inconsequential to cash in on any mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two relevant aspects you should further examine:
- Financial Health: Does Shell Midstream Partners have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Shell Midstream Partners? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.