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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Namoi Cotton Limited (ASX:NAM).
Do Insider Transactions Matter?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
Namoi Cotton Insider Transactions Over The Last Year
The Chairman of the Board Timothy Watson made the biggest insider purchase in the last 12 months. That single transaction was for AU$209k worth of shares at a price of AU$0.31 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.35), 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.
While Namoi Cotton insiders bought shares during the last year, they didn't sell. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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.
Namoi Cotton Insiders Bought Stock Recently
It's good to see that Namoi Cotton 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$278k worth of shares. That shows some optimism about the company's future.
Insider Ownership of Namoi Cotton
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Insiders own 6.9% of Namoi Cotton shares, worth about AU$4.1m, according to our data. But they may have an indirect interest through a corporate structure that we haven't picked up on. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
So What Does This Data Suggest About Namoi Cotton Insiders?
It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. While the overall levels of insider ownership are below what we'd like to see, the history of transactions imply that Namoi Cotton insiders are reasonably well aligned, and optimistic for the future. 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. When we did our research, we found 4 warning signs for Namoi Cotton (1 is potentially serious!) that we believe deserve your full attention.
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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