Many Diamondback Energy, Inc. (NASDAQ:FANG) insiders ditched their stock over the past year, which may be of interest to the company's shareholders. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Diamondback Energy Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the insider, Lyndal Greth, for US$2.3b worth of shares, at about US$175 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (US$153). So it may not shed much light on insider confidence at current levels.

Over the last year, we can see that insiders have bought 8.83k shares worth US$1.5m. On the other hand they divested 13.35m shares, for US$2.3b. All up, insiders sold more shares in Diamondback Energy than they bought, 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 want to know exactly who sold, for how much, and when, simply click on the graph below!

If you are like me, then you will not want to miss this free list of small cap stocks that are not only being bought by insiders but also have attractive valuations.

Diamondback Energy Insiders Are Selling The Stock

There was substantially more insider selling, than buying, of Diamondback Energy shares over the last three months. We note insiders cashed in US$2.3b worth of shares. On the other hand we note insiders bought US$1.5m worth of shares , as previously mentioned . We don't view these transactions as a positive sign.

Insider Ownership

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. It's great to see that Diamondback Energy insiders own 35% of the company, worth about US$16b. 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 Diamondback Energy Insider Transactions Indicate?

The insider sales have outweighed the insider buying, at Diamondback Energy, in the last three months. Zooming out, the longer term picture doesn't give us much comfort. It is good to see high insider ownership, but the insider selling leaves us cautious. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. When we did our research, we found 4 warning signs for Diamondback Energy (2 are significant!) that we believe deserve your full attention.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 of direct interests only, but not derivative transactions or indirect interests.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.