Numerous retail investors examine insider buying activity as part of their stock selection and analysis process, but only a few analyze insider selling. Indeed, accurately interpreting insider selling is close to impossible, considering that corporate insiders usually sell shares for a vast number of reasons that have nothing to do with their companies’ valuation or fundamentals. But, if I were investing my hard-earned money into a company’s stock, I would surely be troubled by massive flows of insider selling. Officers and directors are financially-literate individuals who tend to time their purchases and sales of common stock to maximize or at least increase the possible pay-off: why would an insider sell a stock at $10 a share if he or she believes the stock is worth $60? That’s why Insider Monkey tends to interpret noteworthy insider selling, particularly clusters of insider selling, as a sign that companies approach or exceed their “fair” market value. One should note that corporate insiders do not employ any discounted cash flow models to find that “fair” value, but their gut feelings tend to be quite accurate. Moving on to the main purpose of this article, Insider Monkey processed most Form 4 filings submitted with the SEC on Thursday and pinpointed three companies with noteworthy insider selling.
Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
Healthy Oil and Natural Gas Company Witnesses Board Member Sell Massive Block of Shares
Synergy Resources Corp (NYSEMKT:SYRG) has seen one Board member sell big in the past several weeks. Director Robert W. Noffsinger III sold 60,000 shares on Tuesday for $8.07 each, cutting his ownership to 139,965 shares. Mr. Noffsinger sold an additional 16,650 shares at the end of March at a weighted average price of $7.72 per share.
Synergy Resources operates as a growth-oriented independent oil and natural gas company that engages in the acquisition, development and production of crude oil and natural gas in the Denver-Julesburg Basin (D-J Basin) of Colorado. Specifically, the company primarily targets the three benches of the Niobrara formation and the Codell formation for horizontal drilling and production, which are said to have relatively high liquids content. Let’s now have a look at Synergy Resources Corp (NYSEMKT:SYRG)’s balance sheet to see whether the company is well-positioned to endure a sustained low-oil-price-environment. The company had cash and cash equivalents of $80.7 million at the end of November 30, whereas the debt outstanding under its bank credit facility was $78 million. The company also had $85 million available under the same credit facility. However, the independent oil and natural gas company raised $89.1 million through a public offering of 16.1 million shares (including greenshoe options with respect to 2.1 million shares) at the end of January, which were used to repay the capital borrowed under the credit facility. As a result, Synergy Resources currently has a debt-free balance sheet and a borrowing base of $145 million, none of which was drawn in early February. What’s more, the company raised an additional $164.8 million through a separate public offering earlier this month, so Synergy Resources does have a strong balance sheet indeed.
The company’s capital expenditures for calendar year 2016 are expected to be in the range of $130-to-$150 million, most of which will be channeled into drilling 55 gross wells. Based on this capital budget, the company’ average daily production for 2016 is expected to be in the range of 11,000 BOE/day to 12,000 BOE/day, which represents an increase from the average daily production of 8,750 BOE/day for fiscal 2015 that ended August 31. The shares of the independent crude oil and natural gas company have gained 20% in the past three months, but are down 41% in the past 12 months. The number of hedge funds monitored by Insider Monkey with stakes in Synergy Resources declined to 10 from 13 during the December quarter. Israel Englander’s Millennium Management acquired a new stake of 265,879 shares in Synergy Resources Corp (NYSEMKT:SYRG) during the December quarter.