Yahoo Finance Read This Before Buying Rio Tinto Limited (ASX:RIO) Shares
It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Rio Tinto Limited (ASX:RIO).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Colombia 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’.
View our latest analysis for Rio Tinto
The Last 12 Months Of Insider Transactions At Rio Tinto
Over the last year, we can see that the biggest insider sale was by Zara Fisher for AU$139k worth of shares, at about AU$77.91 per share. So what is clear is that an insider saw fit to sell at around the current price of AU$75.69. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. Arguably, insider selling at around current prices should give us reason to reflect on whether the stock is fully valued at the moment.
In the last twelve months insiders purchased 1.73k shares for AU$132k. On the other hand they divested 2.82k shares, for AU$183k. In total, Rio Tinto insiders sold more than they bought over the last year. The average sell price was around US$64.85. We don’t gain much confidence from insider selling near the recent share price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. The chart below shows insider transactions over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Rio Tinto Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Rio Tinto. In total, insiders bought US$79k worth of shares in that time, and we didn’t record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Rio Tinto
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. Rio Tinto insiders own about AU$8.0m worth of shares (which is 0.007% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Rio Tinto Tell Us?
It’s certainly positive to see the recent insider purchases. But we can’t say the same for the transactions over the last 12 months. Neither the level of insider ownership, nor the transactions over the last twelve months inspire us, but we think the recent buying is positive. Of course, the future is what matters most. So if you are interested in Rio Tinto, you should check out this free report on analyst forecasts for the company.
Of course Rio Tinto may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
