It is not uncommon to see companies perform well in the years after insiders buy shares. 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 GBM Resources Limited (ASX:GBZ), 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 on the market. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
GBM Resources Insider Transactions Over The Last Year
There wasn’t any very large single transaction over the last year, but we can still observe some trading.
Happily, we note that in the last year insiders bought 20.00m shares for a total of AU$100k. In the last twelve months there was more buying than selling by GBM Resources insiders. The average buy price was around AU$0.005. These transactions show that insiders have confidence to invest their own money in the stock, albeit at slightly below the recent price of AU$0.006. The chart below shows insider transactions (by individuals) over the last year. 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 alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of GBM Resources
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. GBM Resources insiders own about AU$2.9m worth of shares (which is 45% 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 Do The GBM Resources Insider Transactions Indicate?
It doesn’t really mean much that no insider has traded GBM Resources shares in the last quarter. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, GBM Resources insiders feel good about the company’s future. Along with insider transactions, I recommend checking if GBM Resources is growing revenue. This free chart of historic revenue and earnings should make that easy.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.