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Should You Take Comfort From Insider Transactions At ARC Resources Ltd. (TSE:ARX)?

Jason Fuller

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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in ARC Resources Ltd. (TSE:ARX).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.

View our latest analysis for ARC Resources

The Last 12 Months Of Insider Transactions At ARC Resources

Over the last year, we can see that the biggest insider purchase was by CEO, President & Director Myron Stadnyk for CA$782k worth of shares, at about CA$8.70 per share. So it’s clear an insider wanted to buy, at around the current price. 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. In any event it’s generally a positive if insiders are buying shares at around the current price.

Happily, we note that in the last year insiders paid CA$3.5m for 370.09k shares. On the other hand they divested 26.90k shares, for CA$365k. Overall, ARC Resources insiders were net buyers last year. Their average price was about CA$9.50. I’d consider this a positive as it suggests insiders see value at around the current price, which is CA$9.40. You can see the insider transactions (by 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!

TSX:ARX Insider Trading February 12th 19

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Insiders at ARC Resources Have Bought Stock Recently

It’s good to see that ARC Resources insiders have made notable investments in the company’s shares. Not only was there no selling that we can see, but they collectively bought CA$2.9m worth of shares. That shows some optimism about the company’s future.

Insider Ownership of ARC Resources

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that ARC Resources insiders own 0.7% of the company, worth about CA$22m. 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 Do The ARC Resources Insider Transactions Indicate?

It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. When combined with notable insider ownership, these factors suggest ARC Resources insiders are well aligned, and that they may think the share price is too low. Of course, the future is what matters most. So if you are interested in ARC Resources, you should check out this free report on analyst forecasts for the company.

But note: ARC Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

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.