We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Element 25 Limited (ASX:E25), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.

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. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Element 25

The Last 12 Months Of Insider Transactions At Element 25

In the last twelve months, the biggest single purchase by an insider was when Independent Non-Executive Chairman Seamus Cornelius bought AU$690k worth of shares at a price of AU$0.43 per share. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$2.35. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

Seamus Cornelius bought a total of 2.99m shares over the year at an average price of AU$0.42. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date! insider-trading-volume

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 freelist of companies. (Hint: insiders have been buying them).



Insider Ownership

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. Element 25 insiders own about AU$58m worth of shares. That equates to 17% 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.

So What Do The Element 25 Insider Transactions Indicate?

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. Insiders do have a stake in Element 25 and their transactions don't cause us concern. While we like knowing 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. Be aware that Element 25 is showing 4 warning signs in our investment analysis, and 2 of those shouldn't be ignored...

But note: Element 25 may not be the best stock to buy. So take a peek at this freelist of interesting companies with high ROE and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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