As Northern Star Resources Limited's market cap (ASX:NST) drops to AU$9.1b, insiders might be questioning their decision to buy earlier this year

The recent 5.9% drop in Northern Star Resources Limited's (ASX:NST) stock could come as a blow to insiders who purchased AU$2.6m worth of stock at an average buy price of AU$9.32 over the past 12 months. Insiders purchase with the hope of seeing their investments increase in value over time. However, due to recent losses, their initial investment is now only worth AU$2.2m, which is not great.

While insider transactions are not the most important thing when it comes to long-term investing, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for Northern Star Resources

The Last 12 Months Of Insider Transactions At Northern Star Resources

In the last twelve months, the biggest single purchase by an insider was when Non-Executive Director Raleigh Finlayson bought AU$959k worth of shares at a price of AU$9.59 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being AU$7.77). Their view may have changed since then, but at least it shows they felt optimistic at the time. 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 Northern Star Resources insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart 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. 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

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.3% of Northern Star Resources shares, worth about AU$116m. 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 Do The Northern Star Resources Insider Transactions Indicate?

It doesn't really mean much that no insider has traded Northern Star Resources shares in the last quarter. On a brighter note, the transactions over the last year are encouraging. Judging from their transactions, and high insider ownership, Northern Star Resources insiders feel good about the company's future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Northern Star Resources. For example - Northern Star Resources has 2 warning signs we think you should be aware of.

Of course Northern Star Resources 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, but not derivative transactions.

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

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.

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