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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 we'll take a look at whether insiders have been buying or selling shares in Amarillo Gold Corporation (CVE:AGC).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
The Last 12 Months Of Insider Transactions At Amarillo Gold
In the last twelve months, the biggest single purchase by an insider was when insider Eric Sprott bought CA$13m worth of shares at a price of CA$0.30 per share. That means that an insider was happy to buy shares at above the current price of CA$0.26. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
While Amarillo Gold insiders bought shares during the last year, they didn't sell. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Amarillo Gold 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 Amarillo Gold Have Bought Stock Recently
Over the last three months, we've seen significant insider buying at Amarillo Gold. Not only was there no selling that we can see, but they collectively bought CA$128k worth of shares. This makes one think the business has some good points.
Does Amarillo Gold 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. I reckon it's a good sign if insiders own a significant number of shares in the company. Amarillo Gold insiders own about CA$21m worth of shares. That equates to 21% of the company. 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 Amarillo Gold Insider Transactions Indicate?
It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. When combined with notable insider ownership, these factors suggest Amarillo Gold insiders are well aligned, and that they may think the share price is too low. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For example, Amarillo Gold has 2 warning signs (and 1 which can't be ignored) we think you should know about.
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.
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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