We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Reward Minerals Limited (ASX:RWD).
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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 Reward Minerals
Notably, that recent purchase by Michael Ruane is the biggest insider purchase of Reward Minerals shares that we've seen in the last year. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.14). It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. We note that Michael Ruane was also the biggest seller.
In the last twelve months insiders purchased 3.16m shares for AU$451k. But insiders sold 3.06m shares worth AU$430k. Overall, Reward Minerals insiders were net buyers during the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Are Reward Minerals Insiders Buying Or Selling?
Over the last three months, we've seen a bit of insider buying at Reward Minerals. They bought AU$442k worth in that time. However, Executive Director Michael Ruane netted AU$430k for sales. While it's good to see the insider buying, the net amount bought isn't enough for us to gain much confidence from it.
Insider Ownership of Reward Minerals
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. I reckon it's a good sign if insiders own a significant number of shares in the company. Reward Minerals insiders own about AU$7.5m worth of shares. That equates to 28% 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 Reward Minerals Insiders?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. The net investment is not enough to encourage us much. But insiders have shown more of an appetite for the stock, over the last year. Overall we don't see anything to make us think Reward Minerals insiders are doubting the company, and they do own shares. 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 Reward Minerals is showing 5 warning signs in our investment analysis, and 2 of those are concerning…
But note: Reward Minerals 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.