Multiple insiders secured a larger position in Elementos Limited (ASX:ELT) shares over the last 12 months. This is reassuring as this suggests that insiders have increased optimism about the company's prospects.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Elementos

Elementos Insider Transactions Over The Last Year

The Non-Executive Chairman Andrew Greig made the biggest insider purchase in the last 12 months. That single transaction was for AU$800k worth of shares at a price of AU$0.18 each. That means that an insider was happy to buy shares at above the current price of AU$0.14. 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. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.

In the last twelve months Elementos insiders were buying shares, but not selling. The average buy price was around AU$0.15. This is nice to see since it implies that insiders might see value around current prices. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. If investing in lesser known companies is your style, you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership Of Elementos

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Elementos insiders own 27% of the company, worth about AU$7.4m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About Elementos Insiders?

It doesn't really mean much that no insider has traded Elementos shares in the last quarter. However, our analysis of transactions over the last year is heartening. Insiders own shares in Elementos and we see no evidence to suggest they are worried about the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. Every company has risks, and we've spotted 5 warning signs for Elementos (of which 3 can't be ignored!) you should know about.

Of course Elementos may not be the best stock to buy. So you may wish to see this free collection of high quality 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 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.