Kula Gold Limited (ASX:KGD) Insiders Have Been Selling

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Kula Gold Limited (ASX:KGD), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

See our latest analysis for Kula Gold

Kula Gold Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the insider, Michael Soucik, sold AU$154k worth of shares at a price of AU$0.02 per share. That means that even when the share price was below the current price of AU$0.038, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was 100% of Michael Soucik's stake.

Over the last year we saw more insider selling of Kula Gold shares, than buying. They sold for an average price of about AU$0.02. We don't gain confidence from insider selling below the recent share price. Since insiders sell for many reasons, we wouldn't put too much weight on it. The chart below shows insider transactions (by companies and 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!

I will like Kula Gold better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insiders at Kula Gold Have Bought Stock Recently

There was some insider buying at Kula Gold over the last quarter. Non Executive Director John Hannaford bought AU$19k worth of shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.

Does Kula Gold Boast High Insider Ownership?

Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Kula Gold insiders own about AU$1.2m worth of shares. That equates to 20% 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 Kula Gold Insider Transactions Indicate?

Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn't worth writing home about. We don't take much encouragement from the transactions by Kula Gold insiders. The modest level of insider ownership is, at least, some comfort. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 4 warning signs for Kula Gold that deserve your attention before buying any shares.

But note: Kula Gold 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. 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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