It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Storm Resources Ltd. (TSE:SRX).
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
The Last 12 Months Of Insider Transactions At Storm Resources
Over the last year, we can see that the biggest insider purchase was by Chairman Stuart Clark for CA$511k worth of shares, at about CA$2.05 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being CA$1.40). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. To us, it’s very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Happily, we note that in the last year insiders paid CA$547k for 272k shares. But they sold 172k for CA$392k. In the last twelve months there was more buying than selling by Storm Resources insiders. You can see the insider transactions (by 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!
Storm Resources Insiders Are Selling The Stock
Over the last three months, we’ve seen a bit of insider selling at Storm Resources. Vice President of Geology Jamie Conboy sold CA$67k worth of shares in that time. But CA$17k was spent on buying, too, . While it’s not great to see insider selling, the net amount sold isn’t enough for us to want to read anything into it.
Insider Ownership of Storm Resources
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. Insiders own 12% of Storm Resources shares, worth about CA$20m. 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 Storm Resources Insider Transactions Indicate?
The stark truth for Storm Resources is that there has been more insider selling than insider buying in the last three months. On the other hand, the insider transactions over the last year are encouraging. And insiders do own shares. So we’re happy enough to look past some selling. Of course, the future is what matters most. So if you are interested in Storm Resources, you should check out this free report on analyst forecasts for the company.
Of course Storm Resources may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.