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 Peel Mining Limited (ASX:PEX).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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 Peel Mining
The Executive Director of Mining & Director James Simpson made the biggest insider purchase in the last 12 months. That single transaction was for AU$520k worth of shares at a price of AU$0.17 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.27), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Peel Mining insiders may have bought shares in the last year, but they didn't sell any. 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!
Peel Mining is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insiders at Peel Mining Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Peel Mining. In total, insiders bought AU$1.0m worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.
Insider Ownership of Peel Mining
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 15% of Peel Mining shares, worth about AU$13m, according to our data. But they may have an indirect interest through a corporate structure that we haven't picked up on. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Does This Data Suggest About Peel Mining Insiders?
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Given that insiders also own a fair bit of Peel Mining we think they are probably pretty confident of a bright 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. Be aware that Peel Mining is showing 5 warning signs in our investment analysis, and 2 of those are significant…
Of course Peel Mining 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.