The recent price decline of 10% in Fireweed Metals Corp.'s (CVE:FWZ) stock may have disappointed insiders who bought CA$4.29m worth of shares at an average price of CA$3.14 in the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth CA$3.15m, which is not great.
Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.
The Last 12 Months Of Insider Transactions At Fireweed Metals
In the last twelve months, the biggest single purchase by an insider was when insider Larry Childress bought CA$1.6m worth of shares at a price of CA$3.16 per share. That means that an insider was happy to buy shares at above the current price of CA$2.31. 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 encouraging to see an insider paid above the current price for shares, as it suggests they saw value, even at higher levels. Larry Childress was the only individual insider to buy during the last year.
Larry Childress purchased 1.37m shares over the year. The average price per share was CA$3.14. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Check out our latest analysis for Fireweed Metals
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.
Does Fireweed Metals Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 14% of Fireweed Metals shares, worth about CA$74m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Fireweed Metals Tell Us?
The recent insider purchase is heartening. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. Insiders likely see value in Fireweed Metals shares, given these transactions (along with notable insider ownership of the company). So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. To help with this, we've discovered 2 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Fireweed Metals.
But note: Fireweed Metals may not be the best stock to buy. So take a peek at this free list 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 of direct interests only, but not derivative transactions or indirect interests.
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