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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell Golden Resources Development International Limited (HKG:677), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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.'
See our latest analysis for Golden Resources Development International
The Last 12 Months Of Insider Transactions At Golden Resources Development International
Notably, that recent purchase by Kwing Chee Lam is the biggest insider purchase of Golden Resources Development International shares that we've seen in the last year. That means that even when the share price was higher than HK$0.50 (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 is very important. 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. Kwing Chee Lam was the only individual insider to buy over the year.
Kwing Chee Lam bought a total of 5.5m shares over the year at an average price of HK$0.52. The chart below shows insider transactions (by 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!
Golden Resources Development International is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Golden Resources Development International Boast High 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. We usually like to see fairly high levels of insider ownership. It appears that Golden Resources Development International insiders own 10% of the company, worth about HK$85m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.