We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Rainbow Rare Earths Limited (LON:RBW).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.’
Rainbow Rare Earths Insider Transactions Over The Last Year
Non-Executive Chairman Adonis Pouroulis made the biggest insider purchase in the last 12 months. That single transaction was for UK£300k worth of shares at a price of UK£0.12 each. That means that even when the share price was higher than UK£0.019 (the recent price), an insider wanted to purchase shares. 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. We always take careful note of the price insiders pay when purchasing shares. It is encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Adonis Pouroulis was the only individual insider to buy over the year.
You can see the insider transactions (by individuals) over the last year depicted in the chart below. 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.
Does Rainbow Rare Earths Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Rainbow Rare Earths insiders own about UK£923k worth of shares. That equates to 25% 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 Do The Rainbow Rare Earths Insider Transactions Indicate?
The fact that there have been no Rainbow Rare Earths insider transactions recently certainly doesn’t bother us. But insiders have shown more of an appetite for the stock, over the last year. Overall we don’t see anything to make us think Rainbow Rare Earths insiders are doubting the company, and they do own shares. 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 Rainbow Rare Earths may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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