Insiders Rewarded With AU$7.4m Addition To Investment As Forrestania Resources Stock Hits AU$58m

Forrestania Resources Limited (ASX:FRS) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 13%, resulting in a AU$6.4m rise in the company's market capitalisation, translating to a gain of 701% on their initial investment. In other words, the original AU$1.05m purchase is now worth AU$8.42m.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

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Forrestania Resources Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by Non-Executive Director Adam Turnbull for AU$367k worth of shares, at about AU$0.026 per share. 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.

Forrestania Resources insiders may have bought shares in the last year, but they didn't sell any. They paid about AU$0.022 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. 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!

See our latest analysis for Forrestania Resources

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Have Forrestania Resources Insiders Traded Recently?

Over the last three months, we've seen a bit of insider buying at Forrestania Resources. Independent Chairman David Geraghty shelled out AU$11k for shares in that time. It's great to see that insiders are only buying, not selling. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.

Insider Ownership Of Forrestania Resources

For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Forrestania Resources insiders own about AU$24m worth of shares (which is 41% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Forrestania Resources Insiders?

Our data shows a little insider buying, but no selling, in the last three months. That said, the purchases were not large. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like Forrestania Resources insiders think the business has merit. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Forrestania Resources. When we did our research, we found 5 warning signs for Forrestania Resources (3 are significant!) that we believe deserve your full attention.

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 of direct interests only, but not derivative transactions or indirect interests.

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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.