Insiders See AU$3.80m Investment In WA Kaolin Jump Last Week

WA Kaolin Limited (ASX:WAK) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 12%, resulting in a AU$3.1m rise in the company's market capitalisation, translating to a gain of 23% on their initial investment. As a result, the stock they originally bought for AU$3.80m is now worth AU$4.67m.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for WA Kaolin

WA Kaolin Insider Transactions Over The Last Year

The Independent Non-Executive Director Kenneth Hall made the biggest insider purchase in the last 12 months. That single transaction was for AU$2.8m worth of shares at a price of AU$0.06 each. That means that even when the share price was higher than AU$0.055 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. 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.

In the last twelve months WA Kaolin insiders were buying shares, but not selling. The average buy price was around AU$0.045. 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 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!

WA Kaolin is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. WA Kaolin insiders own about AU$11m worth of shares. That equates to 38% 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 Does This Data Suggest About WA Kaolin Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in WA Kaolin and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 3 warning signs for WA Kaolin that deserve your attention before buying any shares.

But note: WA Kaolin 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.