Noble Midstream Partners LP owns, operates, develops, and acquires midstream infrastructure assets in the United States. Noble Midstream Partners’s insiders have invested 27,508 shares in the 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. Today we will evaluate whether these decisions are bolstered by analysts’ expectations of future growth as well as recent share price movements.
Which Insiders Are Buying?
There were more Noble Midstream Partners insiders that have bought shares than those that have sold. In total, individual insiders own less than one million shares in the business, or around 0.3% of total shares outstanding. Insiders that have recently ramped up their holdings are: Andrew Viens (board member) and Kenneth Fisher (board member) .
The entity that bought on the open market in the last three months was
Harvest Fund Advisors LLC. 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.
Does Buying Activity Reflect Future Growth?
On the surface, analysts’ earnings growth projection of 18.70% over the next three years provides a decent outlook for the company which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items,Noble Midstream Partners is believed to experience a large double-digit top-line growth over the next year, which appears to flow through to an earnings growth of 16.14%. Continued revenue growth combined with cost-efficiency initiatives could lead to even higher earnings growth going forward. This may be anticipated by insiders which provides a motivation to increase their holdings. Another reason for the timing of share acquisitions could be because they believe the stock has not fully accounted for the growth potential.
Did Insiders Buy On Share Price Volatility?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. In the past three months, Noble Midstream Partners’s share price reached a high of $54.68 and a low of $42.55. This suggests reasonable volatility with a change of 28.51%. Insiders’ purchases may not be driven by this movement but perhaps their view of the company’s growth in the future or simply their individual portfolio rebalancing.
Noble Midstream Partners’s insider meaningful buying activity tells us the shares are currently in favour, which is fairly consistent with earnings growth expectations, although the share price has not moved significantly to warrant reassessment of 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 fundamental aspects you should further examine:
- Financial Health: Does Noble Midstream Partners 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 Noble Midstream Partners? 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.