Usually, when one insider buys stock, it might not be a monumental event. But when multiple insiders are buying like they did in the case of Alara Resources Limited( ASX:AUQ ), that sends out a positive message to the company's shareholders.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
The Last 12 Months Of Insider Transactions At Alara Resources
The Non-Executive Director Vikas Jain made the biggest insider purchase in the last 12 months. That single transaction was for AU$300k worth of shares at a price of AU$0.04 each. That means that even when the share price was higher than AU$0.033 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While Alara Resources insiders bought shares during the last year, they didn't sell. 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!
View our latest analysis for Alara Resources
There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership Of Alara Resources
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Alara Resources insiders own about AU$9.1m worth of shares. That equates to 34% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Alara Resources Insider Transactions Indicate?
The fact that there have been no Alara Resources insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don't see anything to make us think Alara Resources insiders are doubting the company, and they do own shares. 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 2 warning signs for Alara Resources (1 makes us a bit uncomfortable!) that we believe deserve your full attention.
Of course, you might find a fantastic investment by looking elsewhere.So take a peek at this free list of interesting companies.
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.
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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.
