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 we'll take a look at whether insiders have been buying or selling shares in Lotus Resources Limited (ASX:LOT).
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, 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 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'.
View our latest analysis for Lotus Resources
The Last 12 Months Of Insider Transactions At Lotus Resources
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Grant Burnaford Davey bought AU$501k worth of shares at a price of AU$0.02 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.093), we still think insider buying is a positive. 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.
You can see the insider transactions (by companies and 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).
Insider Ownership of Lotus Resources
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. We usually like to see fairly high levels of insider ownership. Our data indicates that Lotus Resources insiders own about AU$7.1m worth of shares (which is 11% of the company). However, it's possible that insiders might have an indirect interest through a more complex structure. We do generally prefer see higher levels of insider ownership.
So What Do The Lotus Resources Insider Transactions Indicate?
The fact that there have been no Lotus Resources insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. The transactions are fine but it'd be more encouraging if Lotus Resources insiders bought more shares in the company. 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 instance, we've identified 4 warning signs for Lotus Resources (2 can't be ignored) you should be aware of.
Of course Lotus 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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