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We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Resources & Energy Group Limited (ASX:REZ), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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'.
View our latest analysis for Resources & Energy Group
Resources & Energy Group Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Chairman Gavin Rezos for AU$500k worth of shares, at about AU$0.05 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.017). Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Gavin Rezos was the only individual insider to buy shares in the last twelve months.
You can see the insider transactions (by 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!
Resources & Energy Group 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.
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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 37% of Resources & Energy Group shares, worth about AU$2.5m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.