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Should You Take Comfort From Insider Transactions At Great Southern Mining Limited (ASX:GSN)?

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·4-min read
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  • GSN.AX

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 before you buy or sell Great Southern Mining Limited (ASX:GSN), you may well want to know whether insiders have been buying or selling.

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 don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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'.

Check out our latest analysis for Great Southern Mining

Great Southern Mining Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when insider Davide Bosio bought AU$769k worth of shares at a price of AU$0.087 per share. That means that an insider was happy to buy shares at above the current price of AU$0.052. It's very possible they regret the purchase, but it's more likely they are bullish about the company. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.

Great Southern Mining insiders may have bought shares in the last year, but they didn't sell any. They paid about AU$0.049 on average. These transactions show that insiders have confidence to invest their own money in the stock, albeit at slightly below the recent price. 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!

insider-trading-volume
insider-trading-volume

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.

Insider Ownership of Great Southern Mining

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. Great Southern Mining insiders own about AU$12m worth of shares (which is 50% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Does This Data Suggest About Great Southern Mining Insiders?

There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Great Southern Mining insiders think the business has merit. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Great Southern Mining. Our analysis shows 6 warning signs for Great Southern Mining (2 can't be ignored!) and we strongly recommend you look at them before investing.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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