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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 we'll take a look at whether insiders have been buying or selling shares in Lucapa Diamond Company Limited (ASX:LOM).
What Is Insider Selling?
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 don't think shareholders should simply follow insider transactions. 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.'
Check out our latest analysis for Lucapa Diamond
The Last 12 Months Of Insider Transactions At Lucapa Diamond
Non-Executive Director Ross Stanley made the biggest insider purchase in the last 12 months. That single transaction was for AU$172k worth of shares at a price of AU$0.15 each. That implies that an insider found the current price of AU$0.15 per share to be enticing. Of course they may have changed their mind. But this suggests they are optimistic. We do always like to see insider buying, but it is worth noting if those purchases were made at well below today's share price, as the discount to value may have narrowed with the rising price. In this case we're pleased to report that the insider purchases were made at close to current prices.
Happily, we note that in the last year insiders bought 2.3m shares for a total of AU$375k. In the last twelve months Lucapa Diamond insiders were buying shares, but not selling. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insiders at Lucapa Diamond Have Bought Stock Recently
It's good to see that Lucapa Diamond insiders have made notable investments in the company's shares. Ross Stanley spent US$154k on stock, and there wasn't any selling. That shows some optimism about the company's future.
Insider Ownership of Lucapa Diamond
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Lucapa Diamond insiders own about AU$12m worth of shares. That equates to 16% of the company. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.