We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Tietto Minerals Limited (ASX:TIE), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.
View our latest analysis for Tietto Minerals
The Last 12 Months Of Insider Transactions At Tietto Minerals
Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Hanjing Xu for AU$200k worth of shares, at about AU$0.26 per share. We do like to see buying, but this purchase was made at well below the current price of AU$0.41. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
While Tietto Minerals insiders bought shares during the last year, they didn't sell. The average buy price was around AU$0.20. We don't deny that it is nice to see insiders buying stock 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 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!
Tietto Minerals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 21% of Tietto Minerals shares, worth about AU$28m. 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 Tietto Minerals Insider Transactions Indicate?
The fact that there have been no Tietto Minerals insider transactions recently certainly doesn't bother us. On a brighter note, the transactions over the last year are encouraging. Insiders own shares in Tietto Minerals and we see no evidence to suggest they are worried about the future. While we like knowing 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. Every company has risks, and we've spotted 4 warning signs for Tietto Minerals (of which 1 shouldn't be ignored!) you should know about.
Of course Tietto Minerals 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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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. Thank you for reading.