We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Kingston Resources Limited (ASX:KSN).
Do Insider Transactions Matter?
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
Kingston Resources Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Ian Ingram for AU$1.6m worth of shares, at about AU$0.16 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.25. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Kingston Resources Boast High Insider Ownership?
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. Kingston Resources insiders own about AU$11m worth of shares. That equates to 16% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
What Might The Insider Transactions At Kingston Resources Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. Overall we don't see anything to make us think Kingston Resources insiders are doubting the company, and they do own shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Our analysis shows 5 warning signs for Kingston Resources (2 are significant!) and we strongly recommend you look at these before investing.
But note: Kingston Resources 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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