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When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in Rainbow Rare Earths Limited's (LON:RBW) instance, it's good news for shareholders.
While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.
See our latest analysis for Rainbow Rare Earths
Rainbow Rare Earths Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Chairman Adonis Pouroulis bought UK£112k worth of shares at a price of UK£0.098 per share. So it's clear an insider wanted to buy, at around the current price, which is UK£0.10. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for Rainbow Rare Earths share holders is that insiders were buying at near the current price.
Happily, we note that in the last year insiders paid UK£182k for 1.70m shares. But they sold 560.02k shares for UK£70k. In the last twelve months there was more buying than selling by Rainbow Rare Earths insiders. 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!
Rainbow Rare Earths is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.
Does Rainbow Rare Earths Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Insiders own 24% of Rainbow Rare Earths shares, worth about UK£16m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Rainbow Rare Earths Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Rainbow Rare Earths shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Rainbow Rare Earths 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. For example, Rainbow Rare Earths has 5 warning signs (and 3 which make us uncomfortable) we think you should know about.