Did Salt Lake Potash Limited (ASX:SO4) Insiders Buy Up More Shares?

It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Salt Lake Potash Limited (ASX:SO4), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Salt Lake Potash

The Last 12 Months Of Insider Transactions At Salt Lake Potash

The Chairman Ian Middlemas made the biggest insider purchase in the last 12 months. That single transaction was for AU$1.4m worth of shares at a price of AU$0.50 each. That means that an insider was happy to buy shares at above the current price of AU$0.37. 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. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

While Salt Lake Potash insiders bought shares during the last year, they didn't sell. They paid about AU$0.44 on average. I'd consider this a positive as it suggests insiders see value at around the current price. 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!

Salt Lake Potash 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.

Does Salt Lake Potash Boast High 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 7.5% of Salt Lake Potash shares, worth about AU$20m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Do The Salt Lake Potash Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Salt Lake Potash shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Salt Lake Potash and their transactions don't cause us concern. 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. When we did our research, we found 3 warning signs for Salt Lake Potash (2 are a bit concerning!) that we believe deserve your full attention.

But note: Salt Lake Potash may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

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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This article by Simply Wall St is general in nature. 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.
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