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It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Calima Energy Limited (ASX:CE1).
What Is Insider Buying?
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 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'.
Calima Energy Insider Transactions Over The Last Year
The insider Robert Brown made the biggest insider purchase in the last 12 months. That single transaction was for AU$883k worth of shares at a price of AU$0.018 each. That means that even when the share price was higher than AU$0.004 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Happily, we note that in the last year insiders paid AU$1.5m for 125.65m shares. On the other hand they divested 23.25m shares, for AU$277k. Overall, Calima Energy insiders were net buyers during the last year. Their average price was about AU$0.012. These transactions suggest that insiders have considered the current price attractive. 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 always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Have Calima Energy Insiders Traded Recently?
We saw Non-Executive Director Alan Stein buy shares worth AU$281k in the last three months. That's only a tiny bit more than the sales, worth AU$277k. So it is hard to draw any conclusion about how insiders are feeling about the stock, from these recent trades.
Does Calima Energy Boast High Insider Ownership?
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. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 32% of Calima Energy shares, worth about AU$2.8m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Do The Calima Energy Insider Transactions Indicate?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. The net investment is not enough to encourage us much. However, our analysis of transactions over the last year is heartening. Overall we don't see anything to make us think Calima Energy insiders are doubting the company, and they do own shares. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. At Simply Wall St, we've found that Calima Energy has 5 warning signs (3 make us uncomfortable!) that deserve your attention before going any further with your analysis.
Of course Calima Energy may not be the best stock to buy. So you may wish to see this free collection of high quality 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.
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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