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It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Kingston Resources Limited (ASX:KSN), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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 equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Check out our latest analysis for Kingston Resources
Kingston Resources Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by insider Ian Ingram for AU$1.6m worth of shares, at about AU$0.16 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$0.24. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Kingston Resources insiders may have bought shares in the last year, but they didn't sell any. 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!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Kingston Resources
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Kingston Resources insiders own 19% of the company, worth about AU$11m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Kingston Resources Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. Insiders own shares in Kingston Resources and we see no evidence to suggest they are worried about the future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Kingston Resources. Case in point: We've spotted 3 warning signs for Kingston Resources you should be aware of.