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 we'll take a look at whether insiders have been buying or selling shares in MinRex Resources Limited (ASX:MRR).
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, 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 equally, we would consider it foolish to ignore insider transactions altogether. 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'.
MinRex Resources Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when insider Adam Blumenthal bought AU$1.5m worth of shares at a price of AU$0.10 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.014). 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
Happily, we note that in the last year insiders paid AU$2.1m for 75.68m shares. On the other hand they divested 34033063 shares, for AU$367k. In the last twelve months there was more buying than selling by MinRex Resources insiders. The average buy price was around AU$0.028. This is nice to see since it implies that insiders might see value around current prices. You can see the insider transactions (by 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!
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).
Insiders at MinRex Resources Have Sold Stock Recently
Over the last three months, we've seen notably more insider selling, than insider buying, at MinRex Resources. In that time, insider James Schwarz dumped AU$235k worth of shares. On the flip side, insider Simon Durack spent AU$1.3k on purchasing shares. Generally this level of net selling might be considered a bit bearish.
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. MinRex Resources insiders own about AU$1.2m worth of shares. That equates to 37% of the company. 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 Do The MinRex Resources Insider Transactions Indicate?
The insider sales have outweighed the insider buying, at MinRex Resources, in the last three months. On the other hand, the insider transactions over the last year are encouraging. And insiders do own shares. So the recent selling doesn't worry us too much. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For example, MinRex Resources has 5 warning signs (and 3 which are a bit concerning) we think you should know about.
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.
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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