Some of the losses seen by insiders who purchased AU$331.6k worth of Magmatic Resources Limited (ASX:MAG) shares over the past year were recovered after the stock increased by 14% over the past week. However, the purchase is proving to be a costly gamble, since losses made by insiders have totalled AU$193k since the time of purchase.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

See our latest analysis for Magmatic Resources

Magmatic Resources Insider Transactions Over The Last Year

The insider Yiu Ming made the biggest insider purchase in the last 12 months. That single transaction was for AU$272k worth of shares at a price of AU$0.13 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.032). While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. 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. Notably Yiu Ming was also the biggest seller.

In the last twelve months insiders purchased 4.35m shares for AU$332k. On the other hand they divested 500.00k shares, for AU$45k. In the last twelve months there was more buying than selling by Magmatic Resources insiders. The average buy price was around AU$0.076. I'd consider this a positive as it suggests insiders see value at around the current price. You can see the insider transactions (by companies and 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!

Magmatic Resources is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Does Magmatic Resources Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Insiders own 31% of Magmatic Resources shares, worth about AU$4.1m. 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 Magmatic Resources Tell Us?

The fact that there have been no Magmatic Resources insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. Insiders do have a stake in Magmatic Resources and their transactions don't cause us concern. 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 Magmatic Resources you should be aware of, and 3 of them are potentially serious.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 of direct interests only, but not derivative transactions or indirect interests.

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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.