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We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in Kosmos Energy Ltd. (NYSE:KOS).
What Is Insider Buying?
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 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. 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'.
Kosmos Energy Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Chairman & CEO Andrew Inglis for US$317k worth of shares, at about US$1.06 per share. We do like to see buying, but this purchase was made at well below the current price of US$3.43. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
In the last twelve months Kosmos Energy insiders were buying shares, but not selling. Their average price was about US$1.20. To my mind it is good that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. 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).
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Insiders own 2.0% of Kosmos Energy shares, worth about US$28m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Kosmos Energy Insider Transactions Indicate?
The fact that there have been no Kosmos Energy insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders own shares in Kosmos Energy and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 2 warning signs for Kosmos Energy that deserve your attention before buying any shares.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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