It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in Breaker Resources NL (ASX:BRB).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 it is perfectly logical to keep tabs on what insiders are doing. 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 Breaker Resources
The Executive Chairman of the Board Thomas Sanders made the biggest insider purchase in the last 12 months. That single transaction was for AU$78k worth of shares at a price of AU$0.22 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.19). Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Happily, we note that in the last year insiders paid AU$184k for 751.63k shares. But insiders sold 133.33k shares worth AU$30k. In the last twelve months there was more buying than selling by Breaker Resources insiders. They paid about AU$0.24 on average. I'd consider this a positive as it suggests insiders see value at around the current price. 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!
Breaker Resources is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Have Breaker Resources Insiders Traded Recently?
We saw some Breaker Resources insider buying shares in the last three months. In total, insiders bought AU$44k worth of shares in that time. But Independent Non-Executive Director Michael Kitney sold AU$30k worth. While it's good to see the insider buying, the net amount bought isn't enough for us to gain much confidence from it.
Insider Ownership of Breaker Resources
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Our data indicates that Breaker Resources insiders own about AU$9.2m worth of shares (which is 15% of the company). But they may have an indirect interest through a corporate structure that we haven't picked up on. Whilst better than nothing, we're not overly impressed by these holdings.
So What Do The Breaker Resources Insider Transactions Indicate?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn't worth writing home about. On a brighter note, the transactions over the last year are encouraging. We'd like to see bigger individual holdings. However, we don't see anything to make us think Breaker Resources insiders are doubting the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Breaker Resources. For example, Breaker Resources has 6 warning signs (and 3 which make us uncomfortable) we think you should know about.
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.
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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