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 we'll take a look at whether insiders have been buying or selling shares in Galilee Energy Limited (ASX:GLL).

What Is Insider Buying?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.

We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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 Galilee Energy

The Last 12 Months Of Insider Transactions At Galilee Energy

Over the last year, we can see that the biggest insider purchase was by insider Stephen Copulos for AU$2.5m worth of shares, at about AU$0.95 per share. That means that an insider was happy to buy shares at above the current price of AU$0.77. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. To us, it's very important to consider the price insiders pay for shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels. We note that Stephen Copulos was both the biggest buyer and the biggest seller.

Over the last year, we can see that insiders have bought 2.84m shares worth AU$2.5m. But insiders sold 3.09m shares worth AU$1.8m. In the last twelve months there was more buying than selling by Galilee Energy insiders. 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!

 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

Many investors like to check how much of a company is owned by 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. It appears that Galilee Energy insiders own 10% of the company, worth about AU$23m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Galilee Energy 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 own shares in Galilee Energy 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 Galilee Energy. For instance, we've identified 3 warning signs for Galilee Energy (1 doesn't sit too well with us) you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this freelist of interesting companies, that have HIGH return on equity 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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