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 Pure Gold Mining Inc. (CVE:PGM), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
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. 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 Pure Gold Mining
In the last twelve months, the biggest single purchase by an insider was when insider Eric Sprott bought CA$10m worth of shares at a price of CA$1.05 per share. Even though the purchase was made at a significantly lower price than the recent price (CA$1.22), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Over the last year, we can see that insiders have bought 12.00m shares worth CA$14m. But insiders sold 1.66m shares worth CA$3.0m. Overall, Pure Gold Mining insiders were net buyers during the last year. Their average price was about CA$1.20. It's great to see insiders putting their own cash into the company's stock, albeit at below the recent share price. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Pure Gold Mining Insiders Bought Stock Recently
Over the last quarter, Pure Gold Mining insiders have spent a meaningful amount on shares. Specifically, insider Eric Sprott bought CA$3.9m worth of shares in that time, and we didn't record any sales whatsoever. This is a positive in our book as it implies some confidence.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Pure Gold Mining insiders own about CA$76m worth of shares. That equates to 16% of the company. 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 Does This Data Suggest About Pure Gold Mining Insiders?
It is good to see the recent insider purchase. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Pure Gold Mining we think they are probably pretty confident of a bright future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. When we did our research, we found 4 warning signs for Pure Gold Mining (1 is a bit unpleasant!) that we believe deserve your full attention.
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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