We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Rox Resources Limited (ASX:RXL), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. 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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
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The Last 12 Months Of Insider Transactions At Rox Resources
CEO, MD & Director Alexander Passmore made the biggest insider purchase in the last 12 months. That single transaction was for AU$100k worth of shares at a price of AU$0.01 each. That means that an insider was happy to buy shares at above the current price of AU$0.01. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
In the last twelve months insiders paid AU$183k for 19.8m shares purchased. While Rox Resources insiders bought shares last year, they didn't sell. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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).
Rox Resources Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Rox Resources. We can see that Alexander Passmore paid AU$148k for shares in the company. No-one sold. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Rox 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. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that Rox Resources insiders own about AU$1.4m worth of shares (which is 11% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Rox Resources Insiders?
It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Rox Resources insiders are expecting a bright future. 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.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.