In This Article:
We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Neometals Ltd (ASX:NMT).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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 it is perfectly logical to keep tabs on what insiders are doing. 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’.
See our latest analysis for Neometals
Want to help shape the future of investing tools and platforms? Take the survey and be part of one of the most advanced studies of stock market investors to date.
The Last 12 Months Of Insider Transactions At Neometals
Deputy Chairman David Reed made the biggest insider sale in the last 12 months. That single transaction was for AU$3.5m worth of shares at a price of AU$0.35 each. That is hardly a positive sign, even though it took place above the latest price (AU$0.23). So it may not tell us anything about how insiders feel about the current share price. David Reed was the only individual insider to sell over the last year.
David Reed divested 11.10m shares over the last 12 months at an average price of AU$0.36. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 15% of Neometals shares, worth about AU$18m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Neometals Tell Us?
There haven’t been any insider transactions in the last three months — that doesn’t mean much. Our analysis of Neometals insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. Along with insider transactions, I recommend checking if Neometals is growing revenue. This free chart of historic revenue and earnings should make that easy.