We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Force Commodities Limited (ASX:4CE), you may well want to know whether insiders have been buying or selling.
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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
Force Commodities Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Jihad Malaeb bought AU$112k worth of shares at a price of AU$0.015 per share. That means that an insider was happy to buy shares at around the current price of AU$0.016. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. The good news for Force Commodities share holders is that insiders were buying at near the current price.
Force Commodities insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Force Commodities is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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 Force Commodities shares, worth about AU$2.2m, according to our data. 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 Force Commodities Insider Transactions Indicate?
The fact that there have been no Force Commodities insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. We'd like to see bigger individual holdings. However, we don't see anything to make us think Force Commodities insiders are doubting the company. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Force Commodities. Every company has risks, and we've spotted 3 warning signs for Force Commodities (of which 1 makes us a bit uncomfortable!) you should know about.
Of course Force Commodities 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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