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Should You Take Comfort From Insider Transactions At TerraCom Limited (ASX:TER)?

Grace Strickland

We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in TerraCom Limited (ASX:TER).

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’

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TerraCom Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Matthew Hunter bought AU$95k worth of shares at a price of AU$0.54 per share. That implies that an insider found the current (approximate) price enticing. Of course they may have changed their mind. But this suggests they are optimistic. In any event it’s generally a positive if insiders are buying shares at around the current price.

Over the last year, we can see that insiders have bought 1.78m shares worth AU$539k. In the last twelve months there was more buying than selling by TerraCom insiders. They paid about AU$0.30 on average. To my mind it is good that insiders have invested their own money in the company. But we must note that the investments were made at well below today’s share price. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

ASX:TER Insider Trading January 23rd 19

TerraCom 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.

Insiders at TerraCom Have Bought Stock Recently

It’s good to see that TerraCom insiders have made notable investments in the company’s shares. Not only was there no selling that we can see, but they collectively bought AU$160k worth of shares. That shows some optimism about the company’s future.

Insider Ownership of TerraCom

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. Insiders own 3.2% of TerraCom shares, worth about AU$8.1m, according to our data. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Overall, this level of ownership isn’t that impressive, but it’s certainly better than nothing!

So What Does This Data Suggest About TerraCom Insiders?

It is good to see recent purchasing. And the longer term insider transactions also give us confidence. But on the other hand, the company made a loss last year, which makes us a little cautious. On this analysis the only slight negative we see is the fairly low (overall) insider ownership; their transactions suggest that they are quite positive on TerraCom stock. I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.