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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So shareholders might well want to know whether insiders have been buying or selling shares in Technology Metals Australia Limited (ASX:TMT).
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, rules govern insider transactions, and certain disclosures are required.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Technology Metals Australia Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Yu Buxiao for AU$766k worth of shares, at about AU$0.15 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.36), we still think insider buying is a positive. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Technology Metals Australia insiders may have bought shares in the last year, but they didn't sell any. Their average price was about AU$0.12. 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 companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
Technology Metals Australia is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Are Technology Metals Australia Insiders Buying Or Selling?
There was only a small bit of insider buying, worth AU$4.4k, in the last three months. So it is hard to draw any conclusion about how insiders are feeling about the stock, from these recent trades.
Insider Ownership of Technology Metals Australia
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Technology Metals Australia insiders own about AU$17m worth of shares. That equates to 31% of the company. 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 Technology Metals Australia Insider Transactions Indicate?
We note a that there has been a bit of insider buying recently (but no selling). Overall the buying isn't worth writing home about. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Technology Metals Australia and their transactions don't cause us concern. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Technology Metals Australia has 2 warning signs and it would be unwise to ignore these.
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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