We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 NRG Energy Inc (NYSE:NRG), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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.’
NRG Energy Insider Transactions Over The Last Year
Executive Vice President of Operations Christopher Moser made the biggest insider sale in the last 12 months. That single transaction was for US$1.5m worth of shares at a price of US$35.11 each. So it’s clear an insider wanted to take some cash off the table, even below the current price of US$39.83. While their view may have changed since they sold, this isn’t a particularly bullish sign. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was 68.1% of Christopher Moser’s stake.
We note that in the last year insiders divested 77.78k shares for a total of US$2.7m. In total, NRG Energy insiders sold more than they bought over the last year. They sold for an average price of about US$35.12. It’s not ideal to see that insiders have sold at around the current price of US$39.83. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. The chart below shows insider transactions over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like NRG Energy better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at NRG Energy Have Sold Stock Recently
Over the last three months, we’ve seen significant insider selling at NRG Energy. In total, insiders sold US$2.4m 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 NRG Energy
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s good to see that NRG Energy insiders own 0.3% of the company, worth about US$38m. This level of insider ownership is good but just short of being particularly stand-out, but it certainly does suggest a reasonable degree of alignment.
So What Do The NRG Energy Insider Transactions Indicate?
Insiders haven’t bought NRG Energy stock in the last three months, but they sure did sell some. And even if we look to the last year, we didn’t see any purchases. Insiders own relatively few shares in the company, and when you consider the sales, we’re not particularly excited about the stock. We’d certainly think twice before buying! Of course, the future is what matters most. So if you are interested in NRG Energy, you should check out this free report on analyst forecasts for the company.
Of course NRG Energy may not be the best stock to buy. So you may wish to see this free collection of high quality 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 email@example.com.