It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Fortescue Metals Group Limited (ASX:FMG).

Do Insider Transactions Matter?

It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.

Check out our latest analysis for Fortescue Metals Group

Fortescue Metals Group Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board John Andrew Forrest bought AU$23m worth of shares at a price of AU$3.95 per share. We do like to see buying, but this purchase was made at well below the current price of AU$8.15. 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.

In the last twelve months insiders paid AU$38m for 9.8m shares purchased. Fortescue Metals Group may have bought shares in the last year, but they didn't sell any. You can see the insider transactions (by 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 always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Fortescue Metals Group insiders own about AU$221m worth of shares (which is 0.9% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of 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. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Fortescue Metals Group insiders feel good about the company's future. Of course, the future is what matters most. So if you are interested in Fortescue Metals Group, you should check out this free report on analyst forecasts for the company.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.