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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 Centennial Resource Development, Inc. (NASDAQ:CDEV), 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 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.'
Centennial Resource Development Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by CFO, VP George Glyphis for US$252k worth of shares, at about US$16.95 per share. That means that even when the share price was higher than US$7.90 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. George Glyphis was the only individual insider to buy over the year.
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!
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).
Does Centennial Resource Development Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Centennial Resource Development insiders own 1.1% of the company, worth about US$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.
What Might The Insider Transactions At Centennial Resource Development Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Centennial Resource Development and we see no evidence to suggest they are worried about the future. Of course, the future is what matters most. So if you are interested in Centennial Resource Development, you should check out this free report on analyst forecasts for the company.
But note: Centennial Resource Development 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.
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.