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 Talos Energy Inc. (NYSE:TALO).
Do Insider Transactions Matter?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
Talos Energy Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Executive VP & Head of Operations Robert Abendschein for US$417k worth of shares, at about US$8.34 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$6.27). 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. 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. Robert Abendschein was the only individual insider to buy during the last year.
You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Talos 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.
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From looking at our data, insiders own US$1.3m worth of Talos Energy stock, about 0.3% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We prefer to see high levels of insider ownership.
So What Do The Talos Energy Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. And the longer term insider transactions also give us confidence. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Talos Energy insiders are expecting a bright future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Talos Energy. Every company has risks, and we've spotted 4 warning signs for Talos Energy (of which 1 shouldn't be ignored!) you should know about.
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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