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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 Chevron Corporation (NYSE:CVX), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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.'
The Last 12 Months Of Insider Transactions At Chevron
In the last twelve months, the biggest single sale by an insider was when the Independent Director, Enrique Hernandez, sold US$513k worth of shares at a price of US$122 per share. That means that an insider was selling shares at slightly below the current price (US$126). We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 21.3% of Enrique Hernandez's holding. The only individual insider seller over the last year was Enrique Hernandez.
Enrique Hernandez divested 6300 shares over the last 12 months at an average price of US$122. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Chevron better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. Insiders own 0.02% of Chevron shares, worth about US$47m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Chevron Tell Us?
An insider sold Chevron shares recently, but they didn't buy any. And even if we look to the last year, we didn't see any purchases. But it is good to see that Chevron is growing earnings. While insiders do own shares, they don't own a heap, and they have been selling. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Chevron, you should check out this free report on analyst forecasts for the company.
Of course Chevron 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 aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.