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 shareholders might well want to know whether insiders have been buying or selling shares in Dreadnought Resources Limited (ASX:DRE).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
Dreadnought Resources Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Chairman Paul Chapman bought AU$110k worth of shares at a price of AU$0.0063 per share. We do like to see buying, but this purchase was made at well below the current price of AU$0.029. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
While Dreadnought Resources insiders bought shares during the last year, they didn't sell. They paid about AU$0.0054 on average. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. You can see a visual depiction of insider transactions (by companies and 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 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.
Does Dreadnought Resources Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with 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. It's great to see that Dreadnought Resources insiders own 43% of the company, worth about AU$28m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Do The Dreadnought Resources Insider Transactions Indicate?
The fact that there have been no Dreadnought Resources insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like Dreadnought Resources insiders think the business has merit. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Be aware that Dreadnought Resources is showing 4 warning signs in our investment analysis, and 2 of those don't sit too well with us...
Of course Dreadnought Resources 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.
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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