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Read This Before Selling Gulf Keystone Petroleum Limited (LON:GKP) Shares

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·3-min read
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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 we'll take a look at whether insiders have been buying or selling shares in Gulf Keystone Petroleum Limited (LON:GKP).

What Is Insider Buying?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.

We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Gulf Keystone Petroleum

Gulf Keystone Petroleum Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by CEO & Director Jon Harris for UK£51k worth of shares, at about UK£1.71 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being UK£1.59). It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months insiders purchased 50.20k shares for UK£87k. But insiders sold 10.23k shares worth UK£20k. Overall, Gulf Keystone Petroleum insiders were net buyers 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 want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
insider-trading-volume

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Have Gulf Keystone Petroleum Insiders Traded Recently?

In the last quarter there were insider sales totalling UK£20k. But that was only a smidgen more than the UK£20k worth of buying. The net selling is so small that it's hard to draw any conclusions from these recent transactions.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data suggests Gulf Keystone Petroleum insiders own 0.3% of the company, worth about UK£1.2m. We prefer to see high levels of insider ownership.

What Might The Insider Transactions At Gulf Keystone Petroleum Tell Us?

Insider selling has just outweighed insider buying in the last three months. But the net divestment is not enough to concern us at all. On a brighter note, the transactions over the last year are encouraging. We'd like to see bigger individual holdings. However, we don't see anything to make us think Gulf Keystone Petroleum insiders are doubting the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Gulf Keystone Petroleum. Every company has risks, and we've spotted 2 warning signs for Gulf Keystone Petroleum you should know about.

But note: Gulf Keystone Petroleum may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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