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 before you buy or sell Fenix Resources Limited (ASX:FEX), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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'.
Fenix Resources Insider Transactions Over The Last Year
The insider Gavin Argyle made the biggest insider purchase in the last 12 months. That single transaction was for AU$178k worth of shares at a price of AU$0.044 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.18), 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.
The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
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).
For a common shareholder, it is worth checking how many shares are held by company 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 20% of Fenix Resources shares, worth about AU$10m. 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 Fenix Resources Tell Us?
It doesn't really mean much that no insider has traded Fenix Resources shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Fenix Resources and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Fenix Resources. Be aware that Fenix Resources is showing 4 warning signs in our investment analysis, and 1 of those is a bit concerning...
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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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