It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Strike Energy Limited (ASX:STX), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
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.
Strike Energy Insider Transactions Over The Last Year
Non-Executive Chairman John Poynton made the biggest insider purchase in the last 12 months. That single transaction was for AU$126k worth of shares at a price of AU$0.10 each. Even though the purchase was made at a significantly lower price than the recent price (AU$0.27), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
You can see the insider transactions (by 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!
Strike Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Does Strike Energy Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Insiders own 10% of Strike Energy shares, worth about AU$43m. 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 Strike Energy Insider Transactions Indicate?
The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Strike Energy we think they are probably pretty confident of a bright future. Along with insider transactions, I recommend checking if Strike Energy is growing revenue. This free chart of historic revenue and earnings should make that easy.
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.