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 Pan American Silver Corp. (TSE:PAAS), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
The Last 12 Months Of Insider Transactions At Pan American Silver
Over the last year, we can see that the biggest insider purchase was by Independent Chairman Ross Beaty for CA$2.4m worth of shares, at about CA$13.95 per share. Even though the purchase was made at a significantly lower price than the recent price (CA$27.59), we still think insider buying is a positive. 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.
Over the last year, we can see that insiders have bought 172.00k shares worth CA$2.4m. But they sold 59148 shares for CA$1.3m. Overall, Pan American Silver insiders were net buyers last year. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Insider Ownership of Pan American Silver
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. Insiders own 2.1% of Pan American Silver shares, worth about CA$119m. 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 Does This Data Suggest About Pan American Silver Insiders?
The fact that there have been no Pan American Silver insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Pan American Silver insiders feel good about the company's future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Pan American Silver. While conducting our analysis, we found that Pan American Silver has 1 warning sign and it would be unwise to ignore this.
But note: Pan American Silver 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.
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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