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 we’ll take a look at whether insiders have been buying or selling shares in SilverBow Resources, Inc. (NYSE:SBOW).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’

View our latest analysis for SilverBow Resources

The Last 12 Months Of Insider Transactions At SilverBow Resources

In the last twelve months, the biggest single sale by an insider was when Chairman of the Board Marcus Rowland sold US$345k worth of shares at a price of US$29.01 per share. So what is clear is that an insider saw fit to sell at around the current price of US$21.78. They could have a variety of motivations for selling, but it’s still not particularly encouraging to see. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.

Over the last year we saw more insider selling of SilverBow Resources shares, than buying. The average sell price was around US$28.68. It’s not ideal to see that insiders have sold at around the current price. Since insiders sell for many reasons, we wouldn’t put too much weight on it. You can see the insider transactions over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

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Insiders at SilverBow Resources Have Sold Stock Recently

The last quarter saw substantial insider selling of SilverBow Resources shares. In total, Marcus Rowland dumped US$345k worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.

Does SilverBow Resources Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. It’s great to see that SilverBow Resources insiders own 1.8% of the company, worth about US$4.5m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The SilverBow Resources Insider Transactions Indicate?

An insider hasn’t bought SilverBow Resources stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn’t give us much comfort. On the plus side, SilverBow Resources makes money, and is growing profits. When you combine this with the relatively low insider ownership, we are very cautious about the stock. We’d certainly think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.