Insiders might want to re-evaluate their AU$827k stock purchase as Cavalier Resources Limited (ASX:CVR) drops to AU$4.5m

Insiders who acquired AU$827k worth of Cavalier Resources Limited's (ASX:CVR) stock at an average price of AU$0.20 in the past 12 months may be dismayed by the recent 19% price decline. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only AU$442k.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

Check out our latest analysis for Cavalier Resources

The Last 12 Months Of Insider Transactions At Cavalier Resources

Over the last year, we can see that the biggest insider purchase was by Executive Chairman Ranko Matic for AU$500k worth of shares, at about AU$0.20 per share. That means that even when the share price was higher than AU$0.10 (the recent price), an insider wanted to purchase shares. 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. 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.

Cavalier Resources insiders may have bought shares in the last year, but they didn't sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Cavalier Resources is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Cavalier Resources insiders own 25% of the company, worth about AU$1.1m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

What Might The Insider Transactions At Cavalier Resources Tell Us?

It doesn't really mean much that no insider has traded Cavalier Resources shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders own shares in Cavalier Resources and we see no evidence to suggest they are worried about the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Case in point: We've spotted 5 warning signs for Cavalier Resources you should be aware of, and 4 of these are significant.

But note: Cavalier 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, but not derivative transactions.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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