It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Davenport Resources Limited (ASX:DAV).
Do Insider Transactions Matter?
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Davenport Resources
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Rory Luff bought AU$503k worth of shares at a price of AU$0.045 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.069. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
In the last twelve months Davenport Resources insiders were buying shares, but not selling. 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 always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insiders at Davenport Resources Have Bought Stock Recently
It's good to see that Davenport Resources insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought AU$697k worth of shares. That shows some optimism about the company's future.
Insider Ownership of Davenport Resources
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Davenport Resources insiders own about AU$6.0m worth of shares. That equates to 20% of the company. 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 Does This Data Suggest About Davenport Resources Insiders?
The recent insider purchases are heartening. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Davenport Resources 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. Our analysis shows 5 warning signs for Davenport Resources (3 are a bit unpleasant!) and we strongly recommend you look at them before investing.
Of course Davenport 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, but not derivative transactions.
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