We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Kinder Morgan, Inc. (NYSE:KMI), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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. 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
Over the last year, we can see that the biggest insider purchase was by Executive Chairman of the Board Richard Kinder for US$5.3m worth of shares, at about US$14.09 per share. Even though the purchase was made at a significantly lower price than the recent price (US$17.64), 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.
Over the last year, we can see that insiders have bought 680.23k shares worth US$9.6m. But they sold 59.59k shares for US$833k. In total, Kinder Morgan insiders bought more than they sold over 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Kinder Morgan
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. Kinder Morgan insiders own 14% of the company, currently worth about US$5.6b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Kinder Morgan Insiders?
It doesn’t really mean much that no insider has traded Kinder Morgan shares in the last quarter. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Kinder Morgan insiders are reasonably well aligned (owning significant chunk of the company’s shares) and optimistic for the future. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. To that end, you should learn about the 4 warning signs we’ve spotted with Kinder Morgan (including 3 which are potentially serious).
Of course Kinder Morgan 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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