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Insiders saw their US$193m investment bump up to US$213m after Fortescue Metals Group Limited (ASX:FMG) soared 7.9% last week

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Fortescue Metals Group Limited (ASX:FMG) insiders who purchased shares in the last 12 months were richly rewarded last week. The stock climbed by 7.9% resulting in a US$4.8b addition to the company’s market value. As a result, the stock they originally bought for US$193m is now worth US$213m.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Fortescue Metals Group

The Last 12 Months Of Insider Transactions At Fortescue Metals Group

In the last twelve months, the biggest single purchase by an insider was when Founder & Chairman of the Board John Andrew Forrest bought AU$193m worth of shares at a price of AU$19.33 per share. So it's clear an insider wanted to buy, at around the current price, which is AU$21.32. 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. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. Happily, the Fortescue Metals Group insiders decided to buy shares at close to current prices.

Fortescue Metals Group insiders may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by companies and 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!

insider-trading-volume
insider-trading-volume

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Insider Ownership of Fortescue Metals Group

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Fortescue Metals Group insiders own 0.6% of the company, currently worth about AU$421m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Fortescue Metals Group Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like Fortescue Metals Group insiders think the business has merit. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Fortescue Metals Group. Every company has risks, and we've spotted 2 warning signs for Fortescue Metals Group (of which 1 makes us a bit uncomfortable!) you should know about.

But note: Fortescue Metals Group 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.