How to Analyze Insider Selling in the Junior Mining Sector

Source:

"insider activity. . .we always factor into our decision-making process. . ."

The junior mining sector has been performing much better in the last few months and many of the shares prices jump up substantially in price. Investors may be asking, 'is it too late to buy or should we sell?'

Information easily available to investors is the insider activity, which we always factor into our decision-making process.

Remember that corporate insiders (i.e., officers, directors and 10%+ shareholders) are also investors. Investors must remember that we are investing to make money so leaving some profits on the table must be acceptable.

What concerns us is when they 'may be' selling because of something negative for the company. This is virtually impossible to assess but we look for signs in their insider activity of company shares.

Establishing a New Position

If you do not currently have a position in common shares of a company we suggest checking out the insiders buys and sells before entering a position. If the insiders are buying this should re-enforce your decision to buy; but if the insiders are selling, this should at least give you reason to pause.

Several steps we would recommend to investors:
  • Look at a chart for the last year
  • Have the shares moved up substantially in price?
  • Are the insiders selling into the rise in price?
  • How many insiders are selling?
Each situation is different but if the shares have moved up substantially, say 100% or more and there are two or more insiders selling, I would not purchase these shares. Let's look for other opportunities.

Evaluating a Current Position

Let's assume you were fortunate to purchase some junior mining shares and have seen the share price rise 100% or so but you find out some insiders are selling. What should you be looking for?
  • How many insiders are selling?
  • Did the insiders sell only one time, or do you see a pattern of selling?
  • Look at a chart for the last year
The good news in this situation is that you have a profit but you need to make sure you do not let it slip away. You only make money when you close out your trade so be smart about it.

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