We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Kinder Morgan, Inc. (NYSE:KMI).
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. 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'.
Kinder Morgan Insider Transactions Over The Last Year
In fact, the recent purchase by Executive Chairman of the Board Richard Kinder was not their only acquisition of Kinder Morgan shares this year. They previously made an even bigger purchase of US$7.8m worth of shares at a price of US$15.51 per share. That means that an insider was happy to buy shares at above the current price of US$13.73. 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 our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Over the last year, we can see that insiders have bought 3.54m shares worth US$64m. On the other hand they divested 427.54k shares, for US$8.6m. In the last twelve months there was more buying than selling by Kinder Morgan insiders. They paid about US$18.16 on average. These transactions suggest that insiders have considered the current price attractive. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Kinder Morgan is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Kinder Morgan Have Bought Stock Recently
At Kinder Morgan,over the last quarter, we have observed quite a lot more insider buying than insider selling. Executive Chairman of the Board Richard Kinder spent US$9.5m on stock. But insider Perry Waughtal sold shares worth US$833k. The buying outweighs the selling, which suggests that insiders may believe the company will do well in the future.
Insider Ownership of Kinder Morgan
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. It's great to see that Kinder Morgan insiders own 14% of the company, worth about US$4.3b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Kinder Morgan Tell Us?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Kinder Morgan. Looks promising! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. When we did our research, we found 5 warning signs for Kinder Morgan (2 are a bit concerning!) that we believe deserve your full attention.
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.
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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