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Need To Know: Danakali Limited (ASX:DNK) Insiders Have Been Buying Shares

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·4 min read
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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 Danakali Limited (ASX:DNK).

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.

See our latest analysis for Danakali

The Last 12 Months Of Insider Transactions At Danakali

The Non-Executive Chairman of the Board Seamus Cornelius made the biggest insider purchase in the last 12 months. That single transaction was for AU$1.7m worth of shares at a price of AU$0.42 each. That means that an insider was happy to buy shares at above the current price of AU$0.41. 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. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Notably Seamus Cornelius was also the biggest seller.

In the last twelve months insiders purchased 7.39m shares for AU$3.2m. On the other hand they divested 4.18m shares, for AU$1.7m. In the last twelve months there was more buying than selling by Danakali insiders. 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!

insider-trading-volume
insider-trading-volume

Danakali is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Does Danakali Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Danakali insiders own 24% of the company, worth about AU$31m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Danakali Insiders?

The fact that there have been no Danakali insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Danakali and their transactions don't cause us concern. 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. Every company has risks, and we've spotted 3 warning signs for Danakali (of which 1 makes us a bit uncomfortable!) you should know about.

Of course Danakali may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

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.

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