It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Gullewa Limited (ASX:GUL).
What Is Insider Buying?
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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Gullewa Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Cyril Bell bought AU$103k worth of shares at a price of AU$0.056 per share. We do like to see buying, but this purchase was made at well below the current price of AU$0.11. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Over the last year, we can see that insiders have bought 3.07m shares worth AU$142k. But insiders sold 1.00m shares worth AU$87k. In total, Gullewa insiders bought more than they sold over the last year. The average buy price was around AU$0.046. To my mind it is good that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Gullewa 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 Gullewa
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Gullewa insiders own about AU$12m worth of shares (which is 68% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Gullewa Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Gullewa insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. 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. To assist with this, we've discovered 5 warning signs that you should run your eye over to get a better picture of Gullewa.
But note: Gullewa may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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, 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.
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