Insider Buyers Lose AU$110k As Patagonia Lithium Sheds AU$996k

The recent 24% drop in Patagonia Lithium Limited's (ASX:PL3) stock could come as a blow to insiders who purchased AU$190.5k worth of stock at an average buy price of AU$0.13 over the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth AU$80.1k, which is not great.

Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Patagonia Lithium

Patagonia Lithium Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when insider Niv Dagan bought AU$112k worth of shares at a price of AU$0.22 per share. That means that even when the share price was higher than AU$0.055 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for 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.

In the last twelve months Patagonia Lithium insiders were buying shares, but not selling. Their average price was about AU$0.13. This is nice to see since it implies that insiders might see value around current prices. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership Of Patagonia Lithium

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. Insiders own 33% of Patagonia Lithium shares, worth about AU$1.1m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

What Might The Insider Transactions At Patagonia Lithium 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 Patagonia Lithium insiders are doubting the company, and they do own shares. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To help with this, we've discovered 4 warning signs (3 shouldn't be ignored!) that you ought to be aware of before buying any shares in Patagonia Lithium.

Of course Patagonia Lithium 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com