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 shareholders might well want to know whether insiders have been buying or selling shares in Frontier Resources Limited (ASX:FNT).
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. 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 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’.
Frontier Resources Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the insider, Fei Peng, for AU$3.6m worth of shares, at about AU$0.012 per share. That means that an insider was selling shares at slightly below the current price (AU$0.012). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it’s only a weak signal. It is worth noting that this sale was 93% of Fei Peng’s holding. Fei Peng was the only individual insider to sell over the last year.
You can see a visual depiction of insider transactions (by 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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. We usually like to see fairly high levels of insider ownership. It appears that Frontier Resources insiders own 36% of the company, worth about AU$2.1m. 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 Frontier Resources Tell Us?
The fact that there have been no Frontier Resources insider transactions recently certainly doesn’t bother us. Still, the insider transactions at Frontier Resources in the last 12 months are not very heartening. But it’s good to see that insiders own shares in the company. To put this in context, take a look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
Of course Frontier Resources 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.