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 shareholders might well want to know whether insiders have been buying or selling shares in Davenport Resources Limited (ASX:DAV).

What Is Insider Buying?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.

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'.

Check out our latest analysis for Davenport Resources

Davenport Resources Insider Transactions Over The Last Year

The Non-Executive Director Rory Luff made the biggest insider purchase in the last 12 months. That single transaction was for AU$503k worth of shares at a price of AU$0.045 each. We do like to see buying, but this purchase was made at well below the current price of AU$0.069. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

In the last twelve months Davenport Resources insiders were buying shares, but not selling. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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).

Insiders at Davenport Resources Have Bought Stock Recently

It's good to see that Davenport Resources insiders have made notable investments in the company's shares. Overall, six insiders shelled out AU$697k for shares in the company -- and none sold. That shows some optimism about the company's future.

Does Davenport Resources Boast High Insider Ownership?

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 Davenport Resources insiders own 20% of the company, worth about AU$6.0m. 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 Davenport Resources Insider Transactions Indicate?

It's certainly positive to see the recent insider purchases. And the longer term insider transactions also give us confidence. But we don't feel the same about the fact the company is making losses. Given that insiders also own a fair bit of Davenport Resources we think they are probably pretty confident of a bright 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 Davenport Resources you should be aware of, and 3 of them can't be ignored.

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.

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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