We often see insiders buying up shares in companies that perform well over the long term. 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 Sunshine Gold Limited (ASX:SHN).
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, most countries require that the company discloses such transactions to the market.
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'.
The Last 12 Months Of Insider Transactions At Sunshine Gold
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Paul Chapman bought AU$440k worth of shares at a price of AU$0.02 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.051. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
Over the last year, we can see that insiders have bought 23.94m shares worth AU$551k. But they sold 1.00m shares for AU$20k. In the last twelve months there was more buying than selling by Sunshine Gold insiders. They paid about AU$0.023 on average. It is certainly positive to see that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Sunshine Gold is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Sunshine Gold Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Sunshine Gold. Overall, three insiders shelled out AU$111k for shares in the company -- and none sold. That shows some optimism about the company's future.
Insider Ownership of Sunshine Gold
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Sunshine Gold insiders own 46% of the company, currently worth about AU$12m based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The Sunshine Gold Insider Transactions Indicate?
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Sunshine Gold. Nice! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 4 warning signs (2 are significant!) that you ought to be aware of before buying any shares in Sunshine Gold.
Of course Sunshine Gold 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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