Insider Spends AU$85k Buying More Shares In Australian Rare Earths

Whilst it may not be a huge deal, we thought it was good to see that the Australian Rare Earths Limited (ASX:AR3) Independent Chairman, Angus Barker, recently bought AU$85k worth of stock, for AU$0.85 per share. Although the purchase is not a big one, increasing their shareholding by only 3.6%, it can be interpreted as a good sign.

Check out our latest analysis for Australian Rare Earths

The Last 12 Months Of Insider Transactions At Australian Rare Earths

In fact, the recent purchase by Angus Barker was the biggest purchase of Australian Rare Earths shares made by an insider individual in the last twelve months, according to our records. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.081). It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

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$0.23. This is nice to see since it implies that insiders might see value around current prices. 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!

Australian Rare Earths is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership Of Australian Rare Earths

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. Australian Rare Earths insiders own about AU$3.4m 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 an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Australian Rare Earths we think they are probably pretty confident of a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. You'd be interested to know, that we found 4 warning signs for Australian Rare Earths and we suggest you have a look.

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