Should You Take Comfort From Insider Transactions At Kenmare Resources plc (LON:KMR)?

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Kenmare Resources plc (LON:KMR), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.

We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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.

View our latest analysis for Kenmare Resources

Kenmare Resources Insider Transactions Over The Last Year

Independent Chairman of the Board Steven McTiernan made the biggest insider purchase in the last 12 months. That single transaction was for UK£100k worth of shares at a price of UK£1.90 each. That means that even when the share price was higher than UK£1.76 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

While Kenmare Resources insiders bought shares last year, they didn’t sell. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

LSE:KMR Recent Insider Trading, March 20th 2020
LSE:KMR Recent Insider Trading, March 20th 2020

Kenmare Resources is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data suggests Kenmare Resources insiders own 0.5% of the company, worth about UK£904k. We consider this fairly low insider ownership.

So What Does This Data Suggest About Kenmare Resources Insiders?

The fact that there have been no Kenmare Resources insider transactions recently certainly doesn’t bother us. However, our analysis of transactions over the last year is heartening. The transactions are fine but it’d be more encouraging if Kenmare Resources insiders bought more shares in the company. So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. Case in point: We’ve spotted 1 warning sign for Kenmare Resources you should be aware of.

But note: Kenmare Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.