Need To Know: Western Areas Limited (ASX:WSA) Insiders Have Been Selling Shares

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Western Areas Limited (ASX:WSA).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.

View our latest analysis for Western Areas

Western Areas Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the MD, CEO & Director, Daniel Lougher, sold AU$175k worth of shares at a price of AU$2.33 per share. That means that even when the share price was below the current price of AU$2.48, an insider wanted to cash in some shares. 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. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 13% of Daniel Lougher's holding. Daniel Lougher was the only individual insider to sell over the last year.

Happily, we note that in the last year insiders paid AU$111k for 57.91k shares. But insiders sold 75.00k shares worth AU$175k. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

I will like Western Areas better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Western Areas Insiders Bought Stock Recently

There was some insider buying at Western Areas over the last quarter. Insiders bought AU$29k worth of shares in that time. It's good to see the insider buying, as well as the lack of recent sellers. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.

Does Western Areas Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Based on our data, Western Areas insiders have about 0.7% of the stock, worth approximately AU$4.8m. However, it's possible that insiders might have an indirect interest through a more complex structure. I generally like to see higher levels of ownership.

So What Do The Western Areas Insider Transactions Indicate?

We note a that there has been a bit of insider buying recently (but no selling). The net investment is not enough to encourage us much. Our analysis of Western Areas insider transactions leaves us unenthusiastic. And usually insiders own more stock in the company, according to our data. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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, 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.
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