FAR Limited's (ASX:FAR) recent AU$12m market cap decline means a loss of US$47k for insiders who bought this year

By
Simply Wall St
Published
November 19, 2021
ASX:FAR
Source: Shutterstock

Insiders who bought US$120k worth of FAR Limited's (ASX:FAR) stock at an average buy price of US$1.20 over the last year may be disappointed by the recent 14% decrease in the stock. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth US$73k, which is not great.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for FAR

The Last 12 Months Of Insider Transactions At FAR

In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Chairman Patrick O’Connor bought AU$76k worth of shares at a price of AU$1.20 per share. That means that even when the share price was higher than AU$0.73 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. The only individual insider to buy over the last year was Patrick O’Connor.

Patrick O’Connor bought 100.00k shares over the last 12 months at an average price of AU$1.20. You can see a visual depiction of insider transactions (by companies and 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!

insider-trading-volume
ASX:FAR Insider Trading Volume November 19th 2021

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that FAR insiders own about AU$3.9m worth of shares (which is 5.3% of the company). But they may have an indirect interest through a corporate structure that we haven't picked up on. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!

So What Do The FAR Insider Transactions Indicate?

The fact that there have been no FAR insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. While we have no worries about the insider transactions, we'd be more comfortable if they owned more FAR stock. 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. To help with this, we've discovered 4 warning signs (2 can't be ignored!) that you ought to be aware of before buying any shares in FAR.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

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