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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Valor Resources Limited (ASX:VAL), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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. 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'.
The Last 12 Months Of Insider Transactions At Valor Resources
In the last twelve months, the biggest single purchase by an insider was when Non Executive Chairman Brian McMaster bought AU$212k worth of shares at a price of AU$0.007 per share. That means that even when the share price was higher than AU$0.004 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Brian McMaster was the only individual insider to buy 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 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).
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data indicates that Valor Resources insiders own about AU$1.1m worth of shares (which is 15% of the company). However, it's possible that insiders might have an indirect interest through a more complex structure. We do generally prefer see higher levels of insider ownership.
What Might The Insider Transactions At Valor Resources Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. 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 Valor Resources insiders bought more shares in the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Valor Resources. At Simply Wall St, we've found that Valor Resources has 5 warning signs (4 don't sit too well with us!) that deserve your attention before going any further with your analysis.
But note: Valor 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.
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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