Insider Buyers Lose AU$321k As Australian Rare Earths Sheds AU$1.9m

Insiders who bought AU$443.5k worth of Australian Rare Earths Limited's (ASX:AR3) stock at an average buy price of AU$0.34 over the last year may be disappointed by the recent 11% decrease in the stock. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth AU$122.1k, which is not what they expected.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Australian Rare Earths

The Last 12 Months Of Insider Transactions At Australian Rare Earths

The Independent Chairman Angus Barker made the biggest insider purchase in the last 12 months. That single transaction was for AU$225k worth of shares at a price of AU$0.45 each. That means that even when the share price was higher than AU$0.093 (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. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

Australian Rare Earths insiders may have bought shares in the last year, but they didn't sell any. The average buy price was around AU$0.34. This is nice to see since it implies that insiders might see value around current prices. The chart below shows insider transactions (by companies and 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!

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Insiders At Australian Rare Earths Have Bought Stock Recently

We saw some Australian Rare Earths insider buying shares in the last three months. Insiders purchased AU$50k worth of shares in that period. It's great to see that insiders are only buying, not selling. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.

Does Australian Rare Earths Boast High Insider Ownership?

Many investors like to check how much of a company is owned by 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. Australian Rare Earths insiders own about AU$3.9m worth of shares. That equates to 27% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Do The Australian Rare Earths Insider Transactions Indicate?

The recent insider purchases are heartening. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Australian Rare Earths insiders are well aligned, and that they may think the share price is too low. While it's good to be aware of 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. Every company has risks, and we've spotted 4 warning signs for Australian Rare Earths you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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 of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com