Chesapeake insider trading indications

Insider trading is technically legal so long as insiders buying or selling shares of their own company properly report their actions in advance. Therefore, these filings are made public, even if it is several weeks after the activity. If there is anyone that knows a company in and out, it would be the insiders of a company, such as the chief executive, financial officers, directors, and presidents. Many times, insider trading can mean nothing at all. For example, Bill Gates has been unloading hundreds of millions of shares of Microsoft, mainly due to his retiring and pursuing other activities.

The stock whose insider activity caught my attention was Chesapeake Energy, the largest independent natural gas producer in America. Natural gas stocks seem to move in such huge swings, so I wouldn’t want to brashly jump in until there is a more concrete indication of a turnaround. However, CEO Aubrey McClendon hasn’t sold a single share in the past five years. Rather, he’s been aggressively purchasing, and at an even more accelerated pace now than before.

So far in 2008, he has purchased over $200 million worth of stock at prices as high as $60, around 40% above the low $44-range it is trading at right now. My thinking is that perhaps, he knows something within the natural gas sector that us regular investors aren`t privy to. Anything related to energy can be affected immensely by elections and policies, and Mr. McClendon is definitely a well-connected man within the government, being a grandson of a senator, as are the other high-level executives within Chesapeake.

Technically, Chesapeake can still drop to $39-$40, and possibly even further, but that would mean Chesapeake has lost 50% of its value from the peak, which is absolutely ridiculous. If there is any sort of bounce off of $39 or $40, then I would get in a little by some long-term options.

Look for more on Chesapeake and natural gas in reports on alternative energy sources in coming weeks.