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 Amex Exploration Inc. (CVE:AMX).
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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
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Amex Exploration Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Eric Sprott for CA$3.0m worth of shares, at about CA$0.75 per share. That means that an insider was happy to buy shares at around the current price of CA$0.92. That means they have been optimistic about the company in the past, though they may have changed their mind. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for Amex Exploration share holders is that insiders were buying at near the current price.
Happily, we note that in the last year insiders bought 6.9m shares for a total of CA$4.4m. While Amex Exploration insiders bought shares last year, they didn't sell. They paid about CA$0.64 on average. We don't deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today's share price. The chart below shows insider transactions (by individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Amex Exploration Insiders Bought Stock Recently
It's good to see that Amex Exploration insiders have made notable investments in the company's shares. Overall, two insiders shelled out CA$906k for shares in the company -- and none sold. This could be interpreted as suggesting a positive outlook.
Insider Ownership of Amex Exploration
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Amex Exploration insiders own about CA$8.9m worth of shares. That equates to 18% 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 Amex Exploration Insider Transactions Indicate?
It is good to see recent purchasing. 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 Amex Exploration we think they are probably pretty confident of a bright future. Along with insider transactions, I recommend checking if Amex Exploration is growing revenue. This free chart of historic revenue and earnings should make that easy.
But note: Amex Exploration may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.