We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Freehill Mining Limited (ASX:FHS).
What Is Insider Buying?
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, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Freehill Mining
In the last twelve months, the biggest single purchase by an insider was when insider Samuel Duddy bought AU$611k worth of shares at a price of AU$0.011 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.087), 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.
Happily, we note that in the last year insiders paid AU$1.3m for 92.94m shares. But they sold 500.00k shares for AU$27k. Overall, Freehill Mining insiders were net buyers during the last year. They paid about AU$0.014 on average. To my mind it is good that insiders have invested their own money in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. 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!
Freehill Mining is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Freehill Mining Insiders Bought Stock Recently
At Freehill Mining,over the last quarter, we have observed quite a lot more insider buying than insider selling. In fact, two insiders bought AU$427k worth of shares. But we did see CFO, Company Secretary & Executive Director Paul Davies sell shares worth AU$27k. Insiders have spent more buying shares than they have selling, so on balance we think they are are probably optimistic.
Does Freehill Mining Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Freehill Mining insiders own 27% of the company, worth about AU$34m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Freehill Mining Tell Us?
It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Freehill Mining we think they are probably pretty confident of a bright future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To help with this, we've discovered 5 warning signs (3 are potentially serious!) that you ought to be aware of before buying any shares in Freehill Mining.
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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