Read This Before Buying Whitehaven Coal Limited (ASX:WHC) Shares

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 Whitehaven Coal Limited (ASX:WHC).

What Is Insider Selling?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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. 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'.

Check out our latest analysis for Whitehaven Coal

Whitehaven Coal Insider Transactions Over The Last Year

The insider, Fritz Kundrun, made the biggest insider sale in the last 12 months. That single transaction was for AU$15m worth of shares at a price of AU$1.17 each. That means that even when the share price was below the current price of AU$1.61, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 30% of Fritz Kundrun's stake.

Over the last year, we can see that insiders have bought 231.34k shares worth AU$234k. But they sold 28.88m shares for AU$37m. In total, Whitehaven Coal insiders sold more than they bought over the last year. The average sell price was around AU$1.29. It's not particularly great to see insiders were selling shares at below recent prices. Of course, the sales could be motivated for a multitude of reasons, so we shouldn't jump to conclusions. 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!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Does Whitehaven Coal Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Whitehaven Coal insiders own 7.0% of the company, worth about AU$106m. 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 Does This Data Suggest About Whitehaven Coal Insiders?

It doesn't really mean much that no insider has traded Whitehaven Coal shares in the last quarter. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Whitehaven Coal insider transactions don't fill us with confidence. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. You'd be interested to know, that we found 1 warning sign for Whitehaven Coal and we suggest you have a look.

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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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