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We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Gold Resource Corporation (NYSEMKT:GORO).
What Is Insider Selling?
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. 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'.
Gold Resource Insider Transactions Over The Last Year
In fact, the recent purchase by Ronald Little was the biggest purchase of Gold Resource shares made by an insider individual in the last twelve months, according to our records. That means that even when the share price was higher than US$2.56 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Happily, we note that in the last year insiders paid US$153k for 57.90k shares. But insiders sold 9.17k shares worth US$35k. Overall, Gold Resource insiders were net buyers during the last year. You can see the insider transactions (by companies and 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Gold Resource Insiders Bought Stock Recently
Over the last quarter, Gold Resource insiders have spent a meaningful amount on shares. In total, insiders bought US$153k worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.
Does Gold Resource Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. 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 Gold Resource insiders own 3.2% of the company, worth about US$6.4m. Whilst better than nothing, we're not overly impressed by these holdings.
What Might The Insider Transactions At Gold Resource Tell Us?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Gold Resource stock. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Gold Resource has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
But note: Gold Resource 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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