We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell Klondike Gold Corp. (CVE:KG), you may well want to know whether insiders have been buying or selling.
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, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. 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.'
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The Last 12 Months Of Insider Transactions At Klondike Gold
In the last twelve months, the biggest single purchase by an insider was when Frank Giustra bought CA$500k worth of shares at a price of CA$0.22 per share. That means that even when the share price was higher than CA$0.20 (the recent price), an insider wanted to purchase shares. 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. 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.
In the last twelve months insiders purchased 3.3m shares for CA$729k. On the other hand they divested 45000 shares, for CA$18k. In the last twelve months there was more buying than selling by Klondike Gold insiders. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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).
Klondike Gold Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Klondike Gold. Not only was there no selling that we can see, but they collectively bought CA$674k worth of shares. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Klondike Gold
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. Insiders own 23% of Klondike Gold shares, worth about CA$5.0m. 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 Klondike Gold Insider Transactions Indicate?
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. Given that insiders also own a fair bit of Klondike Gold we think they are probably pretty confident of a bright future. Along with insider transactions, I recommend checking if Klondike Gold is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Klondike Gold 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.
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