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Some of the losses seen by insiders who purchased AU$717.7k worth of Prospect Resources Limited (ASX:PSC) shares over the past year were recovered after the stock increased by 15% over the past week. However, the purchase is proving to be a costly gamble, since losses made by insiders have totalled AU$184k since the time of purchase.
Although we don't think shareholders should simply follow insider transactions, logic dictates you should pay some attention to whether insiders are buying or selling shares.
View our latest analysis for Prospect Resources
The Last 12 Months Of Insider Transactions At Prospect Resources
In the last twelve months, the biggest single purchase by an insider was when MD, CEO & Director Samuel Hosack bought AU$503k worth of shares at a price of AU$0.14 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.11). It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
While Prospect Resources insiders bought shares during the last year, they didn't sell. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Prospect Resources is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership Of Prospect 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. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Our data indicates that Prospect Resources insiders own about AU$6.6m worth of shares (which is 11% of the company). But they may have an indirect interest through a corporate structure that we haven't picked up on. Overall, this level of ownership isn't that impressive, but it's certainly better than nothing!
What Might The Insider Transactions At Prospect Resources Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. On a brighter note, the transactions over the last year are encouraging. The transactions are fine but it'd be more encouraging if Prospect Resources insiders bought more shares in the company. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To help with this, we've discovered 5 warning signs (2 shouldn't be ignored!) that you ought to be aware of before buying any shares in Prospect Resources.