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Should You Take Comfort From Insider Transactions At Clime Investment Management Limited (ASX:CIW)?

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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Clime Investment Management Limited (ASX:CIW), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Clime Investment Management

Clime Investment Management Insider Transactions Over The Last Year

The Founder & Non-Independent Executive Director John Abernethy made the biggest insider purchase in the last 12 months. That single transaction was for AU$104k worth of shares at a price of AU$0.52 each. So it's clear an insider wanted to buy, at around the current price, which is AU$0.60. That means they have been optimistic about the company in the past, though they may have changed their mind. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider bought shares at close to current prices. John Abernethy was the only individual insider to buy during the last year. Notably John Abernethy was also the biggest seller.

John Abernethy purchased 261.00k shares over the year. The average price per share was AU$0.52. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
insider-trading-volume

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Does Clime Investment Management Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Clime Investment Management insiders own about AU$10m worth of shares. That equates to 26% 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 Does This Data Suggest About Clime Investment Management Insiders?

Insider sales and purchases have netted out over the last three months, so it's hard to draw any conclusion from recent trading. 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 Clime Investment Management 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. Be aware that Clime Investment Management is showing 7 warning signs in our investment analysis, and 1 of those shouldn't be ignored...

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, but not derivative transactions.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.