Bullish Patagonia Lithium Insider Buying Worth AU$1.50m Yet To Pay Off

The recent price decline of 19% in Patagonia Lithium Limited's (ASX:PL3) stock may have disappointed insiders who bought AU$1.50m worth of shares at an average price of AU$0.10 in the past 12 months. This is not good as insiders invest based on expectations that their money will appreciate over time. However, as a result of recent losses, their original investment is now worth only AU$1.20m.

While insider transactions are not the most important thing when it comes to long-term investing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

The Last 12 Months Of Insider Transactions At Patagonia Lithium

Over the last year, we can see that the biggest insider purchase was by insider Jose Manzano for AU$1.5m worth of shares, at about AU$0.10 per share. That means that an insider was happy to buy shares at above the current price of AU$0.08. Their view may have changed since then, but at least it shows they felt optimistic at the time. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. The only individual insider to buy over the last year was Jose Manzano.

You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

View our latest analysis for Patagonia Lithium

Patagonia Lithium 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.

Insider Ownership Of Patagonia Lithium

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Patagonia Lithium insiders own 39% of the company, worth about AU$10m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Does This Data Suggest About Patagonia Lithium Insiders?

The recent insider purchase is heartening. And an analysis of the transactions over the last year also gives 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 Patagonia Lithium we think they are probably pretty confident of a bright future. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Be aware that Patagonia Lithium is showing 5 warning signs in our investment analysis, and 3 of those make us uncomfortable...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.