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Over the last year, a good number of insiders have significantly increased their holdings in Nelson Resources Limited (ASX:NES). This is encouraging because it indicates that insiders are more optimistic about the company's prospects.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
Nelson Resources Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Maosen Zhong for AU$951k worth of shares, at about AU$0.089 per share. That means that even when the share price was higher than AU$0.024 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Notably Maosen Zhong was also the biggest seller.
Over the last year, we can see that insiders have bought 12.65m shares worth AU$1.0m. But insiders sold 3.58m shares worth AU$101k. In the last twelve months there was more buying than selling by Nelson Resources insiders. 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).
Insiders at Nelson Resources Have Sold Stock Recently
Over the last three months, we've seen significant insider selling at Nelson Resources. In total, insider Maosen Zhong sold AU$101k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Our data indicates that Nelson Resources insiders own about AU$576k worth of shares (which is 8.3% of the company). We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. We do generally prefer see higher levels of insider ownership.
So What Do The Nelson Resources Insider Transactions Indicate?
An insider sold Nelson Resources shares recently, but they didn't buy any. On the other hand, the insider transactions over the last year are encouraging. Still, insiders don't own a great deal of the stock. So we can't be sure that insiders are optimistic. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Nelson Resources. Be aware that Nelson Resources is showing 7 warning signs in our investment analysis, and 5 of those are a bit unpleasant...
But note: Nelson 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.