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It is usually uneventful when a single insider buys stock. However, When quite a few insiders buy shares, as it happened in Environmental Clean Technologies Limited's (ASX:ECT) case, it's fantastic news for 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.
View our latest analysis for Environmental Clean Technologies
The Last 12 Months Of Insider Transactions At Environmental Clean Technologies
Over the last year, we can see that the biggest insider purchase was by insider Lloyd Thomson for AU$750k worth of shares, at about AU$0.005 per share. That means that even when the share price was higher than AU$0.0035 (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. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
In the last twelve months Environmental Clean Technologies insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
Environmental Clean Technologies is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. 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's great to see that Environmental Clean Technologies insiders own 46% of the company, worth about AU$3.7m. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Does This Data Suggest About Environmental Clean Technologies Insiders?
There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Environmental Clean Technologies insiders feel good about the company's future. 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. Case in point: We've spotted 3 warning signs for Environmental Clean Technologies you should be aware of.