Cavalier Resources Gains 25%, Insider Trades Reap Benefit

Cavalier Resources Ltd (ASX:CVR) insiders who purchased shares in the last 12 months were richly rewarded last week. The stock climbed by 25% resulting in a AU$5.0m addition to the company’s market value. As a result, the stock they originally bought for AU$182.2k is now worth AU$602.4k.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

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The Last 12 Months Of Insider Transactions At Cavalier Resources

The insider Ross Johns made the biggest insider purchase in the last 12 months. That single transaction was for AU$100k worth of shares at a price of AU$0.23 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.38), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Happily, we note that in the last year insiders paid AU$182k for 1.61m shares. On the other hand they divested 123.10k shares, for AU$31k. In the last twelve months there was more buying than selling by Cavalier Resources insiders. The average buy price was around AU$0.11. To my mind it is good that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

See our latest analysis for Cavalier Resources

Cavalier Resources is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.

Insiders At Cavalier Resources Have Bought Stock Recently

It's good to see that Cavalier Resources insiders have made notable investments in the company's shares. insider Ross Johns spent AU$100k on stock, and there wasn't any selling. This could be interpreted as suggesting a positive outlook.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 25% of Cavalier Resources shares, worth about AU$6.3m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Cavalier Resources Tell Us?

The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Cavalier Resources we think they are probably pretty confident of a bright future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Cavalier Resources. At Simply Wall St, we've found that Cavalier Resources has 5 warning signs (3 are potentially serious!) that deserve your attention before going any further with your analysis.

Of course Cavalier Resources may not be the best stock to buy. So you may wish to see this free collection of high quality 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.