Favorable signs for Sheffield Resources: Numerous insiders have purchased stock

It is usually uneventful when a single insider buys shares. However, when enough insiders buy shares, as happened in Sheffield Resources Limited (ASX:SFX), is fantastic news for shareholders.

While insider trading isn’t the most important thing when it comes to long-term investing, we think it makes perfect sense to keep an eye on what insiders are doing.

Check out our latest analysis for Sheffield Resources

The last 12 months of internal trading at Sheffield Resources

In the past year, we can see that the largest insider purchase was by independent non-executive director John Richards for shares worth $196,000, at about $0.49 per share. That means an insider was happy to buy shares at a price above the current price of $0.46. It is very possible that they regret the purchase, but they are more likely to be optimistic about the company. In our opinion, the price an insider pays for shares is very important. It’s generally more encouraging if they paid above the current price because it suggests they saw value, even at higher levels.

Over the past twelve months, those in Sheffield Resources have bought but not sold shares. You can see insider trading (by companies and individuals) over the past year shown in the chart below. If you click on the chart, you can see all the individual trades, including the share price, individually and the date!

There are always plenty of stocks that insiders buy. So if it suits your style, you can check each stock one by one or take a look at this free of charge list of companies. (Hint: insiders bought them).

The property inside

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of ownership inside. Sheffield Resources insiders reportedly own 13% of the company, worth about $23 million. We have certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest an alignment between insiders and other shareholders.

So what do the Sheffield Resources Insider trades indicate?

There have been no insider trades in the past three months — that’s not a big deal. But insiders have shown more appetite for shares over the past year. Insiders own shares in Sheffield Resources and we see no evidence to suggest they are worried about the future. While we like to know what’s going on with insider ownership and trading, we make sure to also consider the risks a stock faces before making any investment decisions. For example, I identified 2 warning signs for Sheffield Resources (1 is potentially serious) that you should be aware of.

But remember: Sheffield Resources may not be the best stock to buy. So take a look at it free of charge list of interesting companies with high ROE and low debt.

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

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This article from Simply Wall St is general in nature. We only provide commentary based on historical data and analyst forecasts using an unbiased methodology, and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. We aim to provide you with focused long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality materials. Simply Wall St has no position in any of the stocks mentioned.