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The recent 10.0% drop in Rio2 Limited's (CVE:RIO) stock could come as a blow to insiders who purchased US$568k worth of stock at an average buy price of US$0.65 over the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only US$550k.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
The Last 12 Months Of Insider Transactions At Rio2
Notably, that recent purchase by Alexander Black is the biggest insider purchase of Rio2 shares that we've seen in the last year. That means that even when the share price was higher than CA$0.63 (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.
Happily, we note that in the last year insiders paid CA$568k for 873.50k shares. But insiders sold 58.02k shares worth CA$50k. In total, Rio2 insiders bought more than they sold over the last year. 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!
Rio2 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.
Insiders at Rio2 Have Bought Stock Recently
Over the last quarter, Rio2 insiders have spent a meaningful amount on shares. Not only was there no selling that we can see, but they collectively bought CA$568k worth of shares. This makes one think the business has some good points.
Does Rio2 Boast High Insider Ownership?
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It appears that Rio2 insiders own 23% of the company, worth about CA$37m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Rio2 Insiders?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. But we don't feel the same about the fact the company is making losses. Insiders likely see value in Rio2 shares, given these transactions (along with notable insider ownership of the company). 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 example, Rio2 has 3 warning signs (and 1 which is concerning) we think you should know about.
Of course Rio2 may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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. 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.
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