Some of the losses seen by insiders who purchased AU$100k worth of Redstone Resources Limited (ASX:RDS) shares over the past year were recovered after the stock increased by 11% over the past week. However, the purchase is proving to be an expensive wager as insiders are yet to get ahead of their losses which currently stand at AU$17k since the time of purchase.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Last 12 Months Of Insider Transactions At Redstone Resources
In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Edward Van Heemst bought AU$100k worth of shares at a price of AU$0.012 per share. That means that an insider was happy to buy shares at above the current price of AU$0.01. 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 an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. The only individual insider to buy over the last year was Edward Van Heemst.
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 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.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 31% of Redstone Resources shares, worth about AU$2.3m. 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 Redstone Resources Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Redstone Resources shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Redstone Resources 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. To that end, you should learn about the 4 warning signs we've spotted with Redstone Resources (including 2 which shouldn't be ignored).
But note: Redstone Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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