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Should You Take Comfort From Insider Transactions At Rocky Mountain Liquor Inc. (CVE:RUM)?

Simply Wall St

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Rocky Mountain Liquor Inc. (CVE:RUM).

Do Insider Transactions Matter?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.

Check out our latest analysis for Rocky Mountain Liquor

Rocky Mountain Liquor Insider Transactions Over The Last Year

Executive Chairman & President Peter Byrne made the biggest insider purchase in the last 12 months. That single transaction was for CA$188k worth of shares at a price of CA$0.10 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being CA$0.06). 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. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Peter Byrne was the only individual insider to buy over the year.

Peter Byrne purchased 3581600 shares over the year. The average price per share was CA$0.09. You can see the insider transactions (by 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!

TSXV:RUM Recent Insider Trading, October 14th 2019

Rocky Mountain Liquor is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership of Rocky Mountain Liquor

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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 23% of Rocky Mountain Liquor shares, worth about CA$643k. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Rocky Mountain Liquor Tell Us?

The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Rocky Mountain Liquor insiders are well aligned, and that they may think the share price is too low. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.