We often see insiders buying up shares in companies that perform well over the long term. 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 we’ll take a look at whether insiders have been buying or selling shares in Emerald Resources NL (ASX:EMR).
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, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
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The Last 12 Months Of Insider Transactions At Emerald Resources
Over the last year, we can see that the biggest insider purchase was by Non-Executive Chairman Simon Lee for AU$4.0m worth of shares, at about AU$0.03 per share. That means that an insider was happy to buy shares at around the current price. Of course they may have changed their mind. But this suggests they are optimistic. Nonetheless, we consider it positive if insiders want to buy at around the current share price.
In the last twelve months insiders paid AU$12m for 406.67m shares purchased. Overall, Emerald Resources insiders were net buyers last year. The average buy price was around AU$0.03. It’s great to see insiders putting their own cash into the company’s stock, albeit at below the recent share price (AU$0.037). You can see the insider transactions (by 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!
Emerald 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.
Emerald Resources Insiders Bought Stock Recently
It’s good to see that Emerald Resources insiders have made notable investments in the company’s shares. In total, insiders bought AU$12m worth of shares in that time, and we didn’t record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that Emerald Resources insiders own 38% of the company, worth about AU$42m. 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 Emerald Resources Tell Us?
It’s certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. But we don’t feel the same about the fact the company is making losses. Insiders likely see value in Emerald 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 access this interactive graph of past earnings, revenue and cash flow for free .
But note: Emerald Resources 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.