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 shareholders might well want to know whether insiders have been buying or selling shares in TransAtlantic Petroleum Ltd. (NYSEMKT:TAT).
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 in the company. However, most countries require that the company discloses such transactions to the market.
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.'
TransAtlantic Petroleum Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairman & CEO N. Mitchell bought US$5.2m worth of shares at a price of US$0.78 per share. That means that an insider was happy to buy shares at above the current price of US$0.68. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. N. Mitchell was the only individual insider to buy shares in the last twelve months.
N. Mitchell bought a total of 8.0m shares over the year at an average price of US$0.80. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
TransAtlantic Petroleum is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. We usually like to see fairly high levels of insider ownership. TransAtlantic Petroleum insiders own about US$6.7m worth of shares. That equates to 19% of the company. 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 TransAtlantic Petroleum Insiders?
It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of TransAtlantic Petroleum we think they are probably pretty confident of a bright future. I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
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