It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Kalium Lakes Limited (ASX:KLL).
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, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Kalium Lakes
Notably, that recent purchase by Brent Smoothy is the biggest insider purchase of Kalium Lakes shares that we've seen in the last year. That implies that an insider found the current price of AU$0.15 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. In this case we're pleased to report that the insider purchases were made at close to current prices.
In the last twelve months insiders purchased 8.39m shares for AU$1.5m. On the other hand they divested 1040000 shares, for AU$520k. Overall, Kalium Lakes insiders were net buyers during the last year. The average buy price was around AU$0.18. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by individuals) over the last year. 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).
Insiders at Kalium Lakes Have Bought Stock Recently
Over the last quarter, Kalium Lakes insiders have spent a meaningful amount on shares. In total, insiders bought AU$1.2m worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Kalium Lakes insiders own about AU$22m worth of shares. That equates to 20% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Kalium Lakes Tell Us?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Insiders likely see value in Kalium Lakes shares, given these transactions (along with notable insider ownership of the company). While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. At Simply Wall St, we've found that Kalium Lakes has 5 warning signs (2 are potentially serious!) that deserve your attention before going any further with your analysis.
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.
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.
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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. Thank you for reading.