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 Australis Oil & Gas Limited (ASX:ATS), you may well want to know whether insiders have been buying or selling.
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 would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Australis Oil & Gas
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Chairman Jonathan Stewart bought AU$1m worth of shares at a price of AU$0.35 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.20). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. 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.
Over the last year, we can see that insiders have bought 6.1m shares worth AU$1.9m. In the last twelve months Australis Oil & Gas insiders were buying shares, but not selling. They paid about AU$0.31 on average. I'd consider this a positive as it suggests insiders see value at around the current price. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of Australis Oil & Gas
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Australis Oil & Gas insiders own about AU$25m worth of shares. That equates to 12% 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 Australis Oil & Gas Tell Us?
It doesn't really mean much that no insider has traded Australis Oil & Gas shares in the last quarter. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Australis Oil & Gas insiders are doubting the company, and they do own shares. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.