It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Fortescue Metals Group Limited (ASX:FMG).
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 it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Fortescue Metals Group
In the last twelve months, the biggest single purchase by an insider was when Founder & Chairman of the Board John Andrew Forrest bought AU$23m worth of shares at a price of AU$3.95 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$8.29. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
John Andrew Forrest purchased 9829287 shares over the year. The average price per share was AU$3.89. The chart below shows insider transactions (by individuals) over the last year. 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).
Does Fortescue Metals Group Boast High Insider Ownership?
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. It's great to see that Fortescue Metals Group insiders own 0.9% of the company, worth about AU$229m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Fortescue Metals Group Tell Us?
The fact that there have been no Fortescue Metals Group insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. It would be great to see more insider buying, but overall it seems like Fortescue Metals Group insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. 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.
Of course Fortescue Metals Group 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.