It is not uncommon to see companies perform well in the years after insiders buy shares. 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 we'll take a look at whether insiders have been buying or selling shares in Power Metal Resources plc (LON:POW).
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, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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.
The Last 12 Months Of Insider Transactions At Power Metal Resources
Notably, that recent purchase by Paul Johnson is the biggest insider purchase of Power Metal Resources shares that we've seen in the last year. That means that even when the share price was higher than UK£0.004 (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. In our view, the price an insider pays for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Power Metal Resources insiders may have bought shares in the last year, but they didn't sell any. The average buy price was around UK£0.074. These transactions suggest that insiders have considered the current price attractive. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Power Metal Resources is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at Power Metal Resources Have Bought Stock Recently
It's good to see that Power Metal Resources insiders have made notable investments in the company's shares. CEO & Executive Director Paul Johnson spent UK£854k on stock, and there wasn't any selling. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Power Metal Resources
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. From our data, it seems that Power Metal Resources insiders own 9.2% of the company, worth about UK£204k. But they may have an indirect interest through a corporate structure that we haven't picked up on. We do generally prefer see higher levels of insider ownership.
So What Does This Data Suggest About Power Metal Resources Insiders?
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 Power Metal Resources insiders are reasonably well aligned, and optimistic for the future. 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. Every company has risks, and we've spotted 3 warning signs for Power Metal Resources (of which 2 don't sit too well with us!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.
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. Thank you for reading.