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It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Grange Resources Limited (ASX:GRR).
What Is Insider Selling?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, such insiders must disclose their trading activities, and not trade on inside information.
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 Grange Resources
In the last twelve months, the biggest single sale by an insider was when Cheung Ko sold AU$836k worth of shares at a price of AU$0.19 per share. That means that even when the share price was below the current price of AU$0.21, an insider wanted to cash in some shares. While sellers have a variety of reasons for selling, this isn’t particularly great to see. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. We note that the biggest single sale was only 4.7% of Cheung Ko’s holding. Cheung Ko was the only individual insider to sell shares in the last twelve months.
You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Grange Resources better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Grange Resources 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 9.5% of Grange Resources shares, worth about AU$23m. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Do The Grange Resources Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded Grange Resources shares in the last quarter. Our analysis of Grange Resources insider transactions leaves us cautious. But it’s good to see that insiders own shares in the company. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .
Of course Grange Resources may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.