Insider Buyers At LCL Resources Likely Disappointed With 10.0% Slide

The recent 10.0% drop in LCL Resources Limited's (ASX:LCL) stock could come as a blow to insiders who purchased AU$5.20m worth of stock at an average buy price of AU$0.053 over the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only AU$889.5k.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for LCL Resources

The Last 12 Months Of Insider Transactions At LCL Resources

Over the last year, we can see that the biggest insider purchase was by insider Jialing Liu for AU$5.1m worth of shares, at about AU$0.056 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.009). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. We note that Jialing Liu was both the biggest buyer and the biggest seller.

Happily, we note that in the last year insiders paid AU$5.2m for 98.84m shares. But they sold 43.57m shares for AU$4.3m. Overall, LCL Resources insiders were net buyers during the last year. 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!

LCL Resources is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that LCL Resources insiders own 21% of the company, worth about AU$1.8m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The LCL Resources Insider Transactions Indicate?

The fact that there have been no LCL Resources insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders own shares in LCL Resources and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 6 warning signs for LCL Resources (5 are a bit unpleasant!) and we strongly recommend you look at these before investing.

Of course LCL Resources may not be the best stock to buy. So you may wish to see this free collection of high quality 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.