Stock Analysis

Insiders who sold AU$3.5m worth of Westgold Resources Limited (ASX:WGX) stock last year were handsomely rewarded

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Despite the fact that Westgold Resources Limited (ASX:WGX) stock rose 11% last week, insiders who sold AU$3.5m worth of stock in the previous 12 months are likely to be better off. Selling at an average price of AU$1.90, which is higher than the current price, may have been the wisest decision for these insiders as their investment would have been worth less now than when they sold.

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.

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The Last 12 Months Of Insider Transactions At Westgold Resources

In the last twelve months, the biggest single sale by an insider was when the insider, Peter Cook, sold AU$2.0m worth of shares at a price of AU$2.22 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of AU$1.33. So it may not tell us anything about how insiders feel about the current share price. Peter Cook was the only individual insider to sell shares in the last twelve months.

Over the last year, we can see that insiders have bought 83.32k shares worth AU$136k. But they sold 1.84m shares for AU$3.5m. Peter Cook divested 1.84m shares over the last 12 months at an average price of AU$1.90. 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!

ASX:WGX Insider Trading Volume February 3rd 2023

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Does Westgold Resources Boast High 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. It appears that Westgold Resources insiders own 4.8% of the company, worth about AU$30m. 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 Westgold Resources Insider Transactions Indicate?

The fact that there have been no Westgold Resources insider transactions recently certainly doesn't bother us. Still, the insider transactions at Westgold Resources in the last 12 months are not very heartening. The modest level of insider ownership is, at least, some comfort. 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. In terms of investment risks, we've identified 1 warning sign with Westgold Resources and understanding this should be part of your investment process.

But note: Westgold 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, but not derivative transactions.

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