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We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Grange Resources Limited (ASX:GRR), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Grange Resources Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when CEO, MD & Executive Director Honglin Zhao bought AU$280k worth of shares at a price of AU$0.23 per share. That means that an insider was happy to buy shares at around the current price of AU$0.24. Of course they may have changed their mind. But this suggests they are optimistic. 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. In this case we're pleased to report that the insider bought shares at close to current prices. Honglin Zhao was the only individual insider to buy during the last year.
Honglin Zhao purchased 1.29m shares over the year. The average price per share was AU$0.23. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Grange Resources is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Grange Resources insiders own about AU$24m worth of shares. That equates to 8.5% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Grange Resources Insider Transactions Indicate?
The fact that there have been no Grange Resources insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders do have a stake in Grange Resources and their transactions don't cause us concern. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Grange Resources. At Simply Wall St, we found 1 warning sign for Grange Resources that deserve your attention before buying any shares.
But note: Grange 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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