Have Insiders Been Buying Lithium Consolidated Limited (ASX:LI3) Shares?

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 shareholders might well want to know whether insiders have been buying or selling shares in Lithium Consolidated Limited (ASX:LI3).

What Is Insider Selling?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Lithium Consolidated

Lithium Consolidated Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider purchase was by insider Justin Chivers for AU$90k worth of shares, at about AU$0.05 per share. That means that an insider was happy to buy shares at above the current price of AU$0.034. 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.

While Lithium Consolidated insiders bought shares last year, they didn't sell. You can see the insider transactions (by individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

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

Lithium Consolidated Insiders Bought Stock Recently

Over the last three months, we've seen significant insider buying at Lithium Consolidated. Overall, seven insiders shelled out AU$451k for shares in the company -- and none sold. This is a positive in our book as it implies some confidence.

Insider Ownership of Lithium Consolidated

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. It appears that Lithium Consolidated insiders own 29% of the company, worth about AU$1.4m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Do The Lithium Consolidated Insider Transactions Indicate?

It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. But on the other hand, the company made a loss last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest Lithium Consolidated insiders are well aligned, and that they may think the share price is too low. Along with insider transactions, I recommend checking if Lithium Consolidated is growing revenue. This free chart of historic revenue and earnings should make that easy.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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