Read This Before Selling Cassini Resources Limited (ASX:CZI) Shares

We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we’ll take a look at whether insiders have been buying or selling shares in Cassini Resources Limited (ASX:CZI).

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, such insiders must disclose their trading activities, and not trade on inside information.

We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’

See our latest analysis for Cassini Resources

Cassini Resources Insider Transactions Over The Last Year

insider Xiao Yu Bu made the biggest insider purchase in the last 12 months. That single transaction was for AU$1m worth of shares at a price of AU$0.10 each. That means that even when the share price was higher than AU$0.097 (the recent price), an insider wanted to purchase shares. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. 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.

Happily, we note that in the last year insiders bought 18.4m shares for a total of AU$1.8m. While Cassini Resources insiders bought shares last year, they didn’t sell. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

ASX:CZI Recent Insider Trading, July 25th 2019
ASX:CZI Recent Insider Trading, July 25th 2019

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that Cassini Resources insiders own 27% of the company, worth about AU$11m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Cassini Resources Insider Transactions Indicate?

It doesn’t really mean much that no insider has traded Cassini Resources shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Cassini Resources and we see no evidence to suggest they are worried about the future. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

But note: Cassini Resources 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.