It is not uncommon to see companies perform well in the years after insiders buy shares. 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 International Petroleum Corporation ( TSE:IPCO ), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
International Petroleum Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board Lukas Lundin bought CA$700k worth of shares at a price of CA$4.67 per share. So it's clear an insider wanted to buy, at around the current price, which is CA$5.47. 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 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. In this case we're pleased to report that the insider purchases were made at close to current prices.
In the last twelve months insiders purchased 212k shares for CA$1.1m. But insiders sold 50816 shares worth CA$308k. In the last twelve months there was more buying than selling by International Petroleum insiders. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at International Petroleum Have Bought Stock Recently
There has been significantly more insider buying, than selling, at International Petroleum, over the last three months. In total, two insiders bought US$995k worth of shares in that time. But John Festival sold shares worth US$308k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Does International 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. Insiders own 6.4% of International Petroleum shares, worth about CA$58m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About International Petroleum Insiders?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. Insiders likely see value in International Petroleum shares, given these transactions (along with notable insider ownership of the company). Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for International Petroleum .
Of course International Petroleum may not be the best stock to buy . So you may wish to see this free collection of high quality companies.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com . 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.