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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 shareholders might well want to know whether insiders have been buying or selling shares in GBM Resources Limited (ASX:GBZ).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.
The Last 12 Months Of Insider Transactions At GBM Resources
The MD & Executive Director Peter Rohner made the biggest insider purchase in the last 12 months. That single transaction was for AU$174k worth of shares at a price of AU$0.035 each. We do like to see buying, but this purchase was made at well below the current price of AU$0.17. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.
Peter Rohner bought a total of 5.32m shares over the year at an average price of AU$0.035. You can see the insider transactions (by companies and 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 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).
Are GBM Resources Insiders Buying Or Selling?
We have seen a bit of insider selling at GBM Resources, over the last three months. Executive Director Peter Thompson only netted AU$11k selling shares, in that period. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn't sufficiently substantial to be of much use as a signal.
Insider Ownership of GBM Resources
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. GBM Resources insiders own about AU$11m worth of shares. That equates to 18% 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.
What Might The Insider Transactions At GBM Resources Tell Us?
Our data shows a little more insider selling, but no insider buying, in the last three months. However, the sales are not big enough to concern us at all. 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 GBM Resources insiders are doubting the company, and they do own shares. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For instance, we've identified 5 warning signs for GBM Resources (3 make us uncomfortable) you should be aware of.
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.
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