When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase stock, like in Patriot Lithium Limited’s (ASX:PAT) instance, it’s good news for shareholders.
Although we don’t think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
See our latest analysis for Patriot Lithium
The Executive Chairperson & CEO Hugh Warner made the biggest insider purchase in the last 12 months. That single transaction was for AU$100k worth of shares at a price of AU$0.075 each. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.045). 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. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While Patriot Lithium insiders bought shares during the last year, they didn’t sell. The average buy price was around AU$0.06. This is nice to see since it implies that insiders might see value around current prices. 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!
Patriot Lithium is not the only stock insiders are buying. So take a peek at this free list of under-the-radar companies with insider buying.
Over the last quarter, Patriot Lithium insiders have spent a meaningful amount on shares. In total, insiders bought AU$204k worth of shares in that time, and we didn’t record any sales whatsoever. This could be interpreted as suggesting a positive outlook.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Patriot Lithium insiders own 27% of the company, worth about AU$1.5m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. However, we note that the company didn’t make a profit over the last twelve months, which makes us cautious. Given that insiders also own a fair bit of Patriot Lithium we think they are probably pretty confident of a bright future. So while it’s helpful to know what insiders are doing in terms of buying or selling, it’s also helpful to know the risks that a particular company is facing. Be aware that Patriot Lithium is showing 5 warning signs in our investment analysis, and 4 of those are concerning…
