Stock Analysis

Should You Take Comfort From Insider Transactions At Allegiance Coal Limited (ASX:AHQ)?

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ASX:AHQ
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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Allegiance Coal Limited (ASX:AHQ).

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.

Insider transactions are not the most important thing when it comes to long-term investing. 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'.

See our latest analysis for Allegiance Coal

Allegiance Coal Insider Transactions Over The Last Year

In fact, the recent purchase by Mark Gray was the biggest purchase of Allegiance Coal shares made by an insider individual in the last twelve months, according to our records. So it's clear an insider wanted to buy, at around the current price, which is AU$0.051. 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. If someone buys shares at well below current prices, it's a good sign on balance, but keep in mind they may no longer see value. In this case we're pleased to report that the insider purchases were made at close to current prices.

In the last twelve months Allegiance Coal insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
ASX:AHQ Insider Trading Volume December 27th 2020

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

Insiders at Allegiance Coal Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Allegiance Coal. Overall, three insiders shelled out AU$97k for shares in the company -- and none sold. This makes one think the business has some good points.

Insider Ownership of Allegiance Coal

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Our data indicates that Allegiance Coal insiders own about AU$3.7m worth of shares (which is 8.5% of the company). However, it's possible that insiders might have an indirect interest through a more complex structure. We do generally prefer see higher levels of insider ownership.

So What Does This Data Suggest About Allegiance Coal Insiders?

The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on Allegiance Coal 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 5 warning signs (2 don't sit too well with us!) that you ought to be aware of before buying any shares in Allegiance Coal.

But note: Allegiance Coal 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.

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