We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Fortescue Metals Group Limited (ASX:FMG), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.

See our latest analysis for Fortescue Metals Group

The Last 12 Months Of Insider Transactions At Fortescue Metals Group

The Founder & Chairman of the Board John Andrew Forrest made the biggest insider purchase in the last 12 months. That single transaction was for AU$243m worth of shares at a price of AU$10.98 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of AU$24.48. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.

Fortescue Metals Group insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by companies and individuals) over the last year. 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.

Insider Ownership of Fortescue Metals Group

Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Fortescue Metals Group insiders own about AU$262m worth of shares (which is 0.3% 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.

What Might The Insider Transactions At Fortescue Metals Group Tell Us?

The fact that there have been no Fortescue Metals Group insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Fortescue Metals Group insiders feel good about the company's future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Fortescue Metals Group. For instance, we've identified 3 warning signs for Fortescue Metals Group (1 is concerning) you should be aware of.

But note: Fortescue Metals Group 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.

This article by Simply Wall St is general in nature. 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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