We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Egan Street Resources Limited (ASX:EGA).
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 on the market. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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.’
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The Last 12 Months Of Insider Transactions At Egan Street Resources
Over the last year, we can see that the biggest insider sale was by Chris Retzos for AU$86k worth of shares, at about AU$0.28 per share. So we know that an insider sold shares at around the present share price of AU$0.25. While their view may have changed since the sale, this is not a particularly positive fact. We generally tread carefully if insiders have been selling on market, even if they sold slightly above the current price. Chris Retzos was the only individual insider to sell over the last year.
You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Does Egan Street Resources Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that Egan Street Resources insiders own 21% of the company, worth about AU$6.9m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.