We often see insiders buying up shares in companies that perform well over the long term. 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 CMC Metals Ltd. (CVE:CMB).
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, rules govern insider transactions, and certain disclosures are required.
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 Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
See our latest analysis for CMC Metals
The Last 12 Months Of Insider Transactions At CMC Metals
Chairman & CFO Michael Scholz made the biggest insider purchase in the last 12 months. That single transaction was for CA$1.1m worth of shares at a price of CA$0.07 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being CA$0.04). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing 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.
While CMC Metals insiders bought shares during the last year, they didn't sell. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
CMC Metals is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
CMC Metals Insiders Bought Stock Recently
There was some insider buying at CMC Metals over the last quarter. Insiders purchased CA$25k worth of shares in that period. We like it when there are only buyers, and no sellers. But the amount invested in the last three months isn't enough for us too put much weight on it, as a single factor.
Insider Ownership
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. We usually like to see fairly high levels of insider ownership. CMC Metals insiders own about CA$974k worth of shares (which is 50% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The CMC Metals Insider Transactions Indicate?
Our data shows a little insider buying, but no selling, in the last three months. The net investment is not enough to encourage us much. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like CMC Metals insiders think the business has merit. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 4 warning signs for CMC Metals (1 makes us a bit uncomfortable!) and we strongly recommend you look at them before investing.
Of course CMC Metals 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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