Stock Analysis

Need To Know: Alumina Limited (ASX:AWC) Insiders Have Been Buying Shares

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ASX:AWC
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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. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Alumina Limited (ASX:AWC).

What Is Insider Selling?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

See our latest analysis for Alumina

Alumina Insider Transactions Over The Last Year

The Independent Chairman of the Board William Day made the biggest insider purchase in the last 12 months. That single transaction was for AU$92k worth of shares at a price of AU$1.58 each. That implies that an insider found the current price of AU$1.92 per share to be enticing. 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 do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. The good news for Alumina share holders is that insiders were buying at near the current price.

While Alumina insiders bought shares during the last year, they didn't sell. 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:AWC Insider Trading Volume December 15th 2020

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

Insider Ownership of Alumina

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. Our data suggests Alumina insiders own 0.1% of the company, worth about AU$5.3m. But they may have an indirect interest through a corporate structure that we haven't picked up on. We consider this fairly low insider ownership.

So What Does This Data Suggest About Alumina Insiders?

It doesn't really mean much that no insider has traded Alumina shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. We'd like to see bigger individual holdings. However, we don't see anything to make us think Alumina insiders are doubting the company. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Be aware that Alumina is showing 3 warning signs in our investment analysis, and 2 of those make us uncomfortable...

But note: Alumina 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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