It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell SM Energy Company ( NYSE:SM ), 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, such insiders must disclose their trading activities, and not trade on inside information.
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.'
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The Last 12 Months Of Insider Transactions At SM Energy
Over the last year, we can see that the biggest insider purchase was by President Javan Ottoson for US$73k worth of shares, at about US$14.63 per share. That implies that an insider found the current price of US$15.10 per share to be enticing. 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. Happily, the SM Energy insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was Javan Ottoson.
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).
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It appears that SM Energy insiders own 1.1% of the company, worth about US$18m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About SM Energy Insiders?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. Insiders likely see value in SM Energy shares, given these transactions (along with notable insider ownership of the company). 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 .
Of course SM Energy may not be the best stock to buy . So you may wish to see this free collection of high quality companies.
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 firstname.lastname@example.org . 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.