It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Hess Midstream LP (NYSE:HESM), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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’.
The Last 12 Months Of Insider Transactions At Hess Midstream
The Independent Director of Hess Midstream GP LLC Stephen Joseph Letwin made the biggest insider purchase in the last 12 months. That single transaction was for US$70k worth of shares at a price of US$6.98 each. Even though the purchase was made at a significantly lower price than the recent price (US$21.15), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn’t tell us much about what they think of current prices.
In the last twelve months Hess Midstream insiders were buying shares, but not selling. The average buy price was around US$8.11. It is certainly positive to see that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today’s levels. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Hess Midstream is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
For a common shareholder, it is worth checking how many shares are held by company 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. Hess Midstream insiders own about US$12m worth of shares. That equates to 0.2% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Hess Midstream Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Hess Midstream shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Hess Midstream and their transactions don’t cause us concern. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. Every company has risks, and we’ve spotted 4 warning signs for Hess Midstream (of which 1 is a bit concerning!) you should know about.
Of course Hess Midstream may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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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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