We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Element 25 Limited (ASX:E25), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Element 25
The Independent Non-Executive Chairman Seamus Cornelius made the biggest insider purchase in the last 12 months. That single transaction was for AU$690k worth of shares at a price of AU$0.43 each. We do like to see buying, but this purchase was made at well below the current price of AU$1.59. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Seamus Cornelius bought a total of 2.99m shares over the year at an average price of AU$0.42. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Element 25 is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of Element 25
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. Insiders own 17% of Element 25 shares, worth about AU$37m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About Element 25 Insiders?
The fact that there have been no Element 25 insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders own shares in Element 25 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. Our analysis shows 4 warning signs for Element 25 (2 are a bit concerning!) and we strongly recommend you look at them before investing.
Of course Element 25 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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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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