Possible Bearish Signals With West African Resources Insiders Disposing Stock

The fact that multiple West African Resources Limited (ASX:WAF) insiders offloaded a considerable amount of shares over the past year could have raised some eyebrows amongst investors. When evaluating insider transactions, knowing whether insiders are buying versus if they selling is usually more beneficial, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

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.

Check out our latest analysis for West African Resources

The Last 12 Months Of Insider Transactions At West African Resources

Over the last year, we can see that the biggest insider sale was by the Founder, Richard Hyde, for AU$2.6m worth of shares, at about AU$1.31 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of AU$1.53. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 11% of Richard Hyde's holding.

In total, West African Resources insiders sold more than they bought over the last year. 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!

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West African Resources Insiders Are Selling The Stock

The last three months saw significant insider selling at West African Resources. In total, insiders dumped AU$3.8m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership Of West African Resources

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. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 5.3% of West African Resources shares, worth about AU$84m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The West African Resources Insider Transactions Indicate?

Insiders sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. Insiders own shares, but we're still pretty cautious, given the history of sales. We're in no rush to buy! 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. Our analysis shows 2 warning signs for West African Resources (1 is a bit unpleasant!) and we strongly recommend you look at them before investing.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.