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 is usually more beneficial than knowing whether they are selling, 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, we do think it is perfectly logical to keep tabs on what insiders are doing.

View 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$1.41. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 11% of Richard Hyde's holding.

In the last year West African Resources insiders didn't buy any company stock. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Insiders At West African Resources Have Sold Stock Recently

The last three months saw significant insider selling at West African Resources. Specifically, COO & Executive Director Lyndon Hopkins ditched AU$896k 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. We usually like to see fairly high levels of insider ownership. West African Resources insiders own about AU$77m worth of shares. That equates to 4.8% of the company. 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?

An insider sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. But it is good to see that West African Resources is growing earnings. While insiders do own shares, they don't own a heap, and they have been selling. So we'd only buy after careful consideration. 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. To help with this, we've discovered 3 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in West African Resources.

But note: West African Resources 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 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.