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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Kosmos Energy Ltd. (NYSE:KOS).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Kosmos Energy Insider Transactions Over The Last Year
The Chairman & CEO Andrew Inglis made the biggest insider purchase in the last 12 months. That single transaction was for US$317k worth of shares at a price of US$1.06 each. That means that an insider was happy to buy shares at above the current price of US$1.02. 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. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months Kosmos Energy insiders were buying shares, but not selling. They paid about US$1.20 on average. These transactions suggest that insiders have considered the current price attractive. You can see a visual depiction of insider transactions (by companies and 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!
Kosmos Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of Kosmos Energy
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Our data indicates that Kosmos Energy insiders own about US$7.8m worth of shares (which is 1.9% of the company). We do generally prefer see higher levels of insider ownership.
What Might The Insider Transactions At Kosmos Energy Tell Us?
The fact that there have been no Kosmos Energy insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we'd be more comfortable if they owned more Kosmos Energy stock. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. You'd be interested to know, that we found 1 warning sign for Kosmos Energy and we suggest you have a look.
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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