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 Freehill Mining Limited (ASX:FHS), you may well want to know whether insiders have been buying or selling.
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, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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 Freehill Mining
In the last twelve months, the biggest single purchase by an insider was when insider Gavin Ross bought AU$400k worth of shares at a price of AU$0.05 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.072. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Happily, we note that in the last year insiders paid AU$592k for 28.75m shares. But they sold 500.00k shares for AU$27k. In total, Freehill Mining insiders bought more than they sold over the last year. Their average price was about AU$0.021. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. 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.
Insider Ownership of Freehill Mining
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 36% of Freehill Mining shares, worth about AU$42m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Freehill Mining Insider Transactions Indicate?
There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Freehill Mining and we see no evidence to suggest they are worried about the 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 that end, you should learn about the 4 warning signs we've spotted with Freehill Mining (including 2 which are significant).
Of course Freehill Mining 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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