Fortescue Metals Group Limited (ASX:FMG) insiders placed bullish bets worth US$193m in the last 12 months

By
Simply Wall St
Published
September 26, 2021
ASX:FMG
Source: Shutterstock

Multiple insiders secured a larger position in Fortescue Metals Group Limited (ASX:FMG) shares over the last 12 months. This is reassuring as this suggests that insiders have increased optimism about the company's prospects.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Fortescue Metals Group

The Last 12 Months Of Insider Transactions At Fortescue Metals Group

Over the last year, we can see that the biggest insider purchase was by Founder & Chairman of the Board John Andrew Forrest for AU$193m worth of shares, at about AU$19.33 per share. That means that even when the share price was higher than AU$15.34 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

In the last twelve months Fortescue Metals Group insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

insider-trading-volume
ASX:FMG Insider Trading Volume September 26th 2021

Fortescue Metals Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Are Fortescue Metals Group Insiders Buying Or Selling?

Non-Executive Director Jennifer Morris bought just AU$6.0k worth of shares in that time. That's not much at all. Overall, we don't think these recent trades are particularly informative, one way or the other.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Fortescue Metals Group insiders own 0.4% of the company, worth about AU$184m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Fortescue Metals Group Insiders?

Insider purchases may have been minimal, in the last three months, but there was no selling at all. The net investment is not enough to encourage us much. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Fortescue Metals Group insiders feel good about the company's 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. Every company has risks, and we've spotted 3 warning signs for Fortescue Metals Group (of which 1 can't be ignored!) you should know about.

But note: Fortescue Metals Group may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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