We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Hammer Metals Limited (ASX:HMX), 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, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.
Hammer Metals Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Director Zbigniew Lubieniecki bought AU$155k worth of shares at a price of AU$0.025 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.022). It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for 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.
Hammer Metals insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Hammer Metals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Hammer Metals Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Hammer Metals. Not only was there no selling that we can see, but they collectively bought AU$206k worth of shares. This could be interpreted as suggesting a positive outlook.
Does Hammer Metals Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 14% of Hammer Metals shares, worth about AU$1.6m, according to our data. Whilst better than nothing, we're not overly impressed by these holdings.
What Might The Insider Transactions At Hammer Metals Tell Us?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. We would certainly prefer see higher levels of insider ownership but analysis of the insider transactions suggests that Hammer Metals insiders are expecting a bright future. Along with insider transactions, I recommend checking if Hammer Metals is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Hammer Metals 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.
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.
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.
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