We often see insiders buying up shares in companies that perform well over the long term. 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 Frontier Resources Limited (ASX:FNT).
What Is Insider Selling?
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, 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 it is perfectly logical to keep tabs on what insiders are doing. 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 Frontier Resources
Over the last year, we can see that the biggest insider sale was by the insider, Fei Peng, for AU$3.6m worth of shares, at about AU$0.012 per share. So what is clear is that an insider saw fit to sell at around the current price of AU$0.01. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
Over the last year we saw more insider selling of Frontier Resources shares, than buying. You can see a visual depiction of insider transactions (by 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!
If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).
Frontier Resources Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Frontier Resources shares over the last three months. In total, insider Christopher Chong sold AU$329k worth of shares in that time. On the other hand we note Non-Executive Chairman Alec Pismiris bought AU$65k worth of shares. Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.
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. Frontier Resources insiders own about AU$1.7m worth of shares. That equates to 32% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Frontier Resources Insider Transactions Indicate?
The stark truth for Frontier Resources is that there has been more insider selling than insider buying in the last three months. And our longer term analysis of insider transactions didn't bring confidence, either. While insiders do own shares, they don't own a heap, and they have been selling. We're in no rush to buy! In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Frontier Resources. For instance, we've identified 4 warning signs for Frontier Resources (2 are a bit concerning) you should be aware of.
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. Thank you for reading.
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