We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Alkane Resources Limited (ASX:ALK), you may well want to know whether insiders have been buying or selling.
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.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Alkane Resources Insider Transactions Over The Last Year
Notably, that recent purchase by Gavin Smith is the biggest insider purchase of Alkane Resources shares that we've seen in the last year. That means that an insider was happy to buy shares at around the current price of AU$0.68. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the Alkane Resources insider decided to buy shares at close to current prices. The only individual insider to buy over the last year was Gavin Smith.
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!
Alkane Resources is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that Alkane Resources insiders own 2.5% of the company, worth about AU$9.1m. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.
So What Do The Alkane Resources Insider Transactions Indicate?
It's certainly positive to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. While the overall levels of insider ownership are below what we'd like to see, the history of transactions imply that Alkane Resources insiders are reasonably well aligned, and optimistic for the future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Alkane Resources.
Of course Alkane Resources may not be the best stock to buy. So you may wish to see this free collection of high quality 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 email@example.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.