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Generally, when a single insider buys stock, it is usually not a big deal. However, when several insiders are buying, like in the case of Chesapeake Gold Corp. (CVE:CKG), it sends a favourable message to the company's shareholders.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.
The Last 12 Months Of Insider Transactions At Chesapeake Gold
In the last twelve months, the biggest single purchase by an insider was when CEO & Director Alan Pangbourne bought CA$224k worth of shares at a price of CA$4.00 per share. That means that even when the share price was higher than CA$3.85 (the recent price), an insider wanted to purchase shares. 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. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
While Chesapeake Gold insiders bought shares during the last year, they didn't sell. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Chesapeake 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.
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. We usually like to see fairly high levels of insider ownership. It appears that Chesapeake Gold insiders own 35% of the company, worth about CA$91m. 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 Chesapeake Gold Insider Transactions Indicate?
The fact that there have been no Chesapeake Gold insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders own shares in Chesapeake Gold and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 2 warning signs for Chesapeake Gold you should be aware of, and 1 of these is a bit unpleasant.
Of course Chesapeake Gold 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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