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We often see insiders buying up shares in companies that perform well over the long term. 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 we'll take a look at whether insiders have been buying or selling shares in CMC Metals Ltd. (CVE:CMB).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. 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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At CMC Metals
The insider, Michael Scholz, made the biggest insider sale in the last 12 months. That single transaction was for CA$199k worth of shares at a price of CA$0.038 each. That means that an insider was selling shares at slightly below the current price (CA$0.12). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. It is worth noting that this sale was only 20% of Michael Scholz's holding. Notably Michael Scholz was also the biggest buyer, having purchased CA$616k worth of shares.
Over the last year, we can see that insiders have bought 10.21m shares worth CA$616k. But insiders sold 5.62m shares worth CA$241k. Overall, CMC Metals insiders were net buyers during the last year. They paid about CA$0.06 on average. We don't deny that it is nice to see insiders buying stock in the company. However, you should keep in mind that they bought when the share price was meaningfully below today's levels. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
CMC Metals 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.
CMC Metals Insiders Are Selling The Stock
We have seen a bit of insider selling at CMC Metals, over the last three months. CA$40k worth of shares were sold by insiders. But at least we saw CA$25k worth of buying. While it's not great to see insider selling, the net amount sold isn't enough for us to want to read anything into it.
Does CMC Metals Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. CMC Metals insiders own 43% of the company, currently worth about CA$3.4m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At CMC Metals Tell Us?
We note a that there has been a bit of insider buying recently (but no selling). That said, the purchases were not large. On a brighter note, the transactions over the last year are encouraging. With high insider ownership and encouraging transactions, it seems like CMC Metals insiders think the business has merit. 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. Every company has risks, and we've spotted 2 warning signs for CMC Metals (of which 1 is significant!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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. 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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