Who Just Ramped Up Their Shares In Statoil ASA (OB:STL)?
Statoil ASA, an energy company, explores for, produces, transports, refines, and markets petroleum and petroleum-derived products, and other forms of energy in Norway and internationally. Statoil’s insiders have invested more than 2 million shares in the large-cap stocks within the past three months. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.
Check out our latest analysis for Statoil
Who Are Ramping Up Their Shares?
More shares have been bought than sold by Statoil insiders in the past three months. In total, individual insiders own less than one million shares in the business, or around 0.02% of total shares outstanding. .
The entity that bought on the open market in the last three months was
DNB Asset Management AS. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is Future Growth Outlook As Bullish?
At first glance, analysts’ earnings expectations of 35.46% over the next three years illustrates a strong outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items,analysts anticipate a healthy double-digit top-line growth next year, which appears to some extent fall through to its bottom-line growth of 8.70%. Continued revenue growth combined with cost-efficiency initiatives could lead to even higher earnings growth going forward. If insiders anticipate an improvement in earnings, they may ramp up their shares now before the market has incorporate the full growth potential into the share price.
Did Insiders Buy On Share Price Volatility?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. In the past three months, Statoil’s share price reached a high of NOK187.3 and a low of NOK168.7. This indicates a trivial share price movement, with a change of 11.03%. This may mean insiders’ motivation to trade may not be driven by the share price but rather other factors such as their belief in company growth or their personal portfolio rebalancing.
Next Steps:
Statoil’s net buying tells us the stock is in favour with some insiders, which is relatively consistent with expected earnings growth, though share price volatility was perhaps inconsequential to cash in on any mispricing. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve put together two relevant aspects you should look at:
Financial Health: Does Statoil have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Statoil? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass 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.
