The recent price decline of 11% in Quartz Mountain Resources Ltd.'s (CVE:QZM) stock may have disappointed insiders who bought CA$400k worth of shares at an average price of CA$0.20 in the past 12 months. Insiders invest with the hopes of seeing their money grow in value over time. However, as a result of recent losses, their initial investment is now only worth CA$340k, which is not what they expected.
Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.
The Chairman Robert Dickinson made the biggest insider purchase in the last 12 months. That single transaction was for CA$250k worth of shares at a price of CA$0.20 each. That means that an insider was happy to buy shares at above the current price of CA$0.17. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when insiders have purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price.
In the last twelve months Quartz Mountain Resources insiders were buying shares, but not selling. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Quartz Mountain Resources insiders own about CA$5.2m worth of shares (which is 66% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
There haven't been any insider transactions in the last three months -- that doesn't mean much. However, our analysis of transactions over the last year is heartening. With high insider ownership and encouraging transactions, it seems like Quartz Mountain Resources insiders think the business has merit. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Quartz Mountain Resources. At Simply Wall St, we've found that Quartz Mountain Resources has 6 warning signs (5 can't be ignored!) that deserve your attention before going any further with your analysis.
But note: Quartz Mountain Resources 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.