We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell North Arrow Minerals Inc. (CVE:NAR), you may well want to know whether insiders have been buying or selling.
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 in the company. However, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. 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'.
North Arrow Minerals Insider Transactions Over The Last Year
Notably, that recent purchase by David Thomas is the biggest insider purchase of North Arrow Minerals shares that we've seen in the last year. That means that even when the share price was higher than CA$0.10 (the recent price), an insider wanted to purchase shares. 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 when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. The only individual insider to buy over the last year was David Thomas.
David Thomas bought a total of 1.36m shares over the year at an average price of CA$0.098. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
North Arrow Minerals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of North Arrow Minerals
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 14% of North Arrow Minerals shares, worth about CA$1.6m, according to our data. However, it's possible that insiders might have an indirect interest through a more complex structure. Whilst better than nothing, we're not overly impressed by these holdings.
So What Do The North Arrow Minerals Insider Transactions Indicate?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. While the overall levels of insider ownership are below what we'd like to see, the history of transactions imply that North Arrow Minerals insiders are reasonably well aligned, and optimistic for the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To that end, you should learn about the 2 warning signs we've spotted with North Arrow Minerals (including 1 which is a bit unpleasant).
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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