Should You Take Comfort From Insider Transactions At Gran Tierra Energy Inc. (NYSEMKT:GTE)?

By
Simply Wall St
Published
July 17, 2020
AMEX:GTE

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Gran Tierra Energy Inc. (NYSEMKT:GTE).

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, most countries require that the company discloses such transactions to the market.

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. 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'.

See our latest analysis for Gran Tierra Energy

The Last 12 Months Of Insider Transactions At Gran Tierra Energy

Over the last year, we can see that the biggest insider purchase was by Independent Director Brooke Wade for US$265k worth of shares, at about US$1.44 per share. That means that an insider was happy to buy shares at above the current price of US$0.33. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

Over the last year, we can see that insiders have bought 2.29m shares worth US$1.5m. But they sold 39.90k shares for US$9.6k. In the last twelve months there was more buying than selling by Gran Tierra Energy insiders. They paid about US$0.66 on average. I'd consider this a positive as it suggests insiders see value at around the current price. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
AMEX:GTE Insider Trading Volume July 17th 2020

Gran Tierra Energy 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.

Are Gran Tierra Energy Insiders Buying Or Selling?

Over the last three months, we've seen a bit of insider selling at Gran Tierra Energy. insider Thomas Claugus only netted US$9.6k selling shares, in that period. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn't sufficiently substantial to be of much use as a signal.

Insider Ownership of Gran Tierra Energy

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From looking at our data, insiders own US$3.1m worth of Gran Tierra Energy stock, about 2.5% of the company. We consider this fairly low insider ownership.

So What Does This Data Suggest About Gran Tierra Energy Insiders?

We did not see any insider buying in the last three months, but we did see selling. But given the selling was modest, we're not worried. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think Gran Tierra Energy insiders are doubting the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To assist with this, we've discovered 2 warning signs that you should run your eye over to get a better picture of Gran Tierra Energy.

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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