It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Carawine Resources Limited (ASX:CWX), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 it is perfectly logical to keep tabs on what insiders are doing. 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'.
The Last 12 Months Of Insider Transactions At Carawine Resources
In the last twelve months, the biggest single purchase by an insider was when insider Christopher Wallin bought AU$216k worth of shares at a price of AU$0.10 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.21. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
In the last twelve months Carawine Resources insiders were buying shares, but not selling. They paid about AU$0.12 on average. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Carawine Resources 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.
Carawine Resources Insiders Bought Stock Recently
Over the last quarter, Carawine Resources insiders have spent a meaningful amount on shares. insider Christopher Wallin spent AU$174k on stock, and there wasn't any selling. This is a positive in our book as it implies some confidence.
Insider Ownership of Carawine Resources
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. Carawine Resources insiders own about AU$2.9m worth of shares. That equates to 17% 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 Carawine 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. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in Carawine Resources shares, given these transactions (along with notable insider ownership of the company). 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.
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.
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