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 we'll take a look at whether insiders have been buying or selling shares in DGO Gold Limited (ASX:DGO).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 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'.
DGO Gold Insider Transactions Over The Last Year
The Executive Chairman, Eduard Eshuys, made the biggest insider sale in the last 12 months. That single transaction was for AU$2.2m worth of shares at a price of AU$3.45 each. So it's clear an insider wanted to take some cash off the table, even slightly below the current price of AU$3.52. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 15% of Eduard Eshuys's holding.
Over the last year, we can see that insiders have bought 1.43m shares worth AU$3.1m. But insiders sold 863.33k shares worth AU$2.8m. In total, DGO Gold insiders bought more than they sold over the last year. They paid about AU$2.17 on average. We don't deny that it is nice to see insiders buying stock in the company. However, we do note that they were buying at significantly lower prices than today's share price. 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).
Insider Ownership of DGO Gold
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. DGO Gold insiders own about AU$86m worth of shares. That equates to 32% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At DGO Gold Tell Us?
The fact that there have been no DGO Gold insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in DGO Gold and we see no evidence to suggest they are worried about the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. At Simply Wall St, we've found that DGO Gold has 4 warning signs (3 are concerning!) that deserve your attention before going any further with your analysis.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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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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. 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.
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