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 E2 Metals Limited (ASX:E2M).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. 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.'
E2 Metals Insider Transactions Over The Last Year
There wasn't any very large single transaction over the last year, but we can still observe some trading.
In the last twelve months insiders purchased 508k shares for AU$82k. On the other hand they divested 150k shares, for AU$36k. In the last twelve months there was more buying than selling by E2 Metals insiders. 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!
E2 Metals 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.
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. From our data, it seems that E2 Metals insiders own 14% of the company, worth about AU$2.8m. However, it's possible that insiders might have an indirect interest through a more complex structure. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Does This Data Suggest About E2 Metals Insiders?
It doesn't really mean much that no insider has traded E2 Metals shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. The transactions are fine but it'd be more encouraging if E2 Metals insiders bought more shares in the company. Along with insider transactions, I recommend checking if E2 Metals is growing revenue. This free chart of historic revenue and earnings should make that easy.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.