When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in NICO Resources Limited’s (ASX:NC1) instance, it’s good news for shareholders.
Although we don’t think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
View our latest analysis for NICO Resources
The Non-Executive Chairman Peter Cook made the biggest insider purchase in the last 12 months. That single transaction was for AU$300k worth of shares at a price of AU$0.15 each. That means that even when the share price was higher than AU$0.09 (the recent price), an insider wanted to purchase shares. It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. To us, it’s very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
In the last twelve months insiders purchased 2.50m shares for AU$375k. But they sold 1.13m shares for AU$135k. Overall, NICO Resources insiders were net buyers during the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
NICO Resources is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.
The last three months saw some NICO Resources insider selling. Non-Executive Director Roderick Corps sold just AU$19k worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the selling simply isn’t sufficiently substantial to be of much use as a signal.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that NICO Resources insiders own 35% of the company, worth about AU$3.4m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
Our data shows a little more insider selling, but no insider buying, in the last three months. However, the sales are not big enough to concern us at all. On a brighter note, the transactions over the last year are encouraging. Overall we don’t see anything to make us think NICO Resources insiders are doubting the company, and they do own shares. 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. For instance, we’ve identified 5 warning signs for NICO Resources (4 make us uncomfortable) you should be aware of.
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