Last week, Orica Limited (ASX:ORI) insiders, who had purchased shares in the previous 12 months were rewarded handsomely. The shares increased by 4.6% last week, resulting in a AU$272m increase in the company's market worth. Put another way, the original AU$300k acquisition is now worth AU$421k.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Orica

The Last 12 Months Of Insider Transactions At Orica

Over the last year, we can see that the biggest insider purchase was by Independent Non-Executive Director Boon Foo for AU$250k worth of shares, at about AU$15.62 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$13.64). 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. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months Orica insiders were buying shares, but not selling. Their average price was about AU$9.72. It is certainly positive to see that insiders have invested their own money 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 companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

Orica is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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. From our data, it seems that Orica insiders own 0.2% of the company, worth about AU$10m. We do generally prefer see higher levels of insider ownership.

What Might The Insider Transactions At Orica Tell Us?

The fact that there have been no Orica insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Orica and their transactions don't cause us concern. 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 2 warning signs for Orica you should be aware of, and 1 of these is significant.