We often see insiders buying up shares in companies that perform well over the long term. 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 GTI Resources Limited (ASX:GTR), 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, most countries require that the company discloses such transactions to the market.
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'.
The Last 12 Months Of Insider Transactions At GTI Resources
The insider Tolga Kumova made the biggest insider purchase in the last 12 months. That single transaction was for AU$149k worth of shares at a price of AU$0.01 each. We do like to see buying, but this purchase was made at well below the current price of AU$0.02. 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.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
GTI Resources 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 GTI 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. GTI Resources insiders own about AU$3.3m worth of shares. That equates to 25% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Does This Data Suggest About GTI Resources Insiders?
It doesn't really mean much that no insider has traded GTI Resources shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in GTI Resources and their transactions don't cause us concern. 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. At Simply Wall St, we've found that GTI Resources has 4 warning signs (2 don't sit too well with us!) that deserve your attention before going any further with your analysis.
But note: GTI Resources 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.
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.