Yahoo Finance Bullish Atlas Iron Limited (ASX:AGO) Insiders Ramp Up Investment In Stock
Atlas Iron Limited, an independent iron ore company, explores for, develops, mines, and sells iron ore in the Pilbara region in Western Australia. Atlas Iron is one of Australia’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 3939.94 million shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider buying outperformed the market by 4.5%. However, these signals may not be enough to gain conviction on whether to invest. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late. View out our latest analysis for Atlas Iron
Which Insiders Are Buying?
More shares have been bought than sold by Atlas Iron insiders in the past three months. In total, individual insiders own over 287.74 million shares in the business, which makes up around 3.1% of total shares outstanding.
Does Buying Activity Reflect Future Growth?
At first glance, there are dark clouds on the horizon for Atlas Iron. Delving deeper into the line items, Atlas Iron is expected to experience negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. This is expected to impact its bottom line next year given the large negative growth rate expected, implying cost management may not be effective enough to bring the company into positive earnings growth. Although, insiders seem to know something the market does not and have been ramping up their holdings in times of uncertainty. This indicates they may see a turnaround or deem the stock to be over-penalized by negative market sentiment.
Did Insiders Buy On Share Price Volatility?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. In the past three months, Atlas Iron’s share price reached a high of A$0.045 and a low of A$0.020. This indicates a substantial share price volatility with a change of 125%. Insiders could perceive this meaningful movement as an opportunity to accumulate their shareholdings.
Next Steps:
Atlas Iron’s net buying tells us the stock is in favour with some insiders, although the expected earnings growth challenges this conclusion, while a very volatile share price could be the motivation to trade. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two fundamental aspects you should look at:
Financial Health: Does Atlas Iron have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Atlas Iron? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
