Stock Analysis

How Much Are Nickel Mines Limited (ASX:NIC) Insiders Taking Off The Table?

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ASX:NIC
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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Nickel Mines Limited (ASX:NIC).

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 in the company. However, most countries require that the company discloses such transactions to the market.

Insider transactions are not the most important thing when it comes to long-term investing. 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'.

Check out our latest analysis for Nickel Mines

Nickel Mines Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the Non-Executive Director, Weifeng Huang, sold AU$3.2m worth of shares at a price of AU$1.08 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$1.48. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. This single sale was 67% of Weifeng Huang's stake. Weifeng Huang was the only individual insider to sell over the last year. Notably Weifeng Huang was also the biggest buyer, having purchased AU$2.2m worth of shares.

The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
ASX:NIC Insider Trading Volume March 15th 2021

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

Nickel Mines Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Nickel Mines. In total, Non-Executive Director Weifeng Huang sold AU$3.2m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Nickel Mines insiders own about AU$359m worth of shares (which is 10% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Nickel Mines Insider Transactions Indicate?

An insider sold Nickel Mines shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. 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. Every company has risks, and we've spotted 4 warning signs for Nickel Mines (of which 1 makes us a bit uncomfortable!) you should know about.

Of course Nickel Mines 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, but not derivative transactions.

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