Possible Turnaround For Patagonia Lithium Insiders, Still Down AU$1.2m

Insiders who bought AU$4.50m worth of Patagonia Lithium Limited (ASX:PL3) stock in the last year have seen some of their losses recouped as the stock gained 10.0% last week. However, the purchase is proving to be a costly gamble, since losses made by insiders have totalled AU$1.2m since the time of purchase.

Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.

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The Last 12 Months Of Insider Transactions At Patagonia Lithium

In the last twelve months, the biggest single purchase by an insider was when insider Jose Manzano bought AU$2.4m worth of shares at a price of AU$0.08 per share. That means that even when the share price was higher than AU$0.044 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. 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.

While Patagonia Lithium insiders bought shares during the last year, they didn't sell. The average buy price was around AU$0.06. These transactions suggest that insiders have considered the current price attractive. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

View our latest analysis for Patagonia Lithium

Patagonia Lithium 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.

Insiders At Patagonia Lithium Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at Patagonia Lithium. insider Jose Manzano spent AU$1.9m on stock, and there wasn't any selling. That shows some optimism about the company's future.

Does Patagonia Lithium Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. It's great to see that Patagonia Lithium insiders own 62% of the company, worth about AU$4.9m. 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 Patagonia Lithium Insider Transactions Indicate?

It is good to see the recent insider purchase. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Once you factor in the high insider ownership, it certainly seems like insiders are positive about Patagonia Lithium. Looks promising! 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 5 warning signs for Patagonia Lithium (of which 4 don't sit too well with us!) you should know about.

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.