It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Kirkland Lake Gold Ltd. (TSE:KL), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
Kirkland Lake Gold Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the insider, Eric Sprott, sold CA$129m worth of shares at a price of CA$50.64 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of CA$63.47. 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. This single sale was just 24% of Eric Sprott's stake.
Over the last year, we can see that insiders have bought 15.28k shares worth CA$821k. But they sold 2.87m shares for CA$129m. All up, insiders sold more shares in Kirkland Lake Gold than they bought, over the last year. 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 Kirkland Lake Gold better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Kirkland Lake Gold
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 0.05% of Kirkland Lake Gold shares, worth about CA$8.4m, according to our data. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Does This Data Suggest About Kirkland Lake Gold Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. Our analysis of Kirkland Lake Gold insider transactions leaves us unenthusiastic. And usually insiders own more stock in the company, according to our data. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To assist with this, we've discovered 1 warning sign that you should run your eye over to get a better picture of Kirkland Lake Gold.
But note: Kirkland Lake Gold 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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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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