I’ve seen some columns on directors buying and selling shares in their own companies, could Eureka Report explain how significant such action is for a company? I’m interested in knowing more about this and what we can interpret from a director buying or selling shares.
Editor’s response: Thanks for your letter. At the bottom of Collected Wisdom each week, we include a small section on some recent director trades that I think you would find it of interest.
By looking at who’s buying and selling company shares, investors can sometimes get an idea as to the outlook and perhaps the director’s confidence in the company. If a director or multiple directors increase their stake(s), it’s generally seen as a vote of confidence. Some investors use that as part of their analysis when considering buying / selling shares. A director selling down a stake can be viewed negatively, especially if it’s a large sale, but it could also be for reasons such as selling to meet tax obligations or a pressing need for cash.
I am enjoying my membership of Eureka Report, I find the articles very interesting and informative. I was hoping one of the contributors could shed some light on a company called Talga Resources. I have had some shares in this outfit for some time and the share price has fallen significantly. I would appreciate some insight.
Tim Treadgold’s response: Talga is suffering from a cash squeeze like many small explorers that lack a cash-generating asset. It is struggling to fund exploration commitments on its Swedish graphite tenements and is yet to find a buyer for the iron ore assets it had planned to sell. Until interest returns to the graphite sector, or Talga finds a partner with deep pockets, it will struggle because while graphite is a hot minor commodity there is not a shortage of supply, or potential new mines. Depending on your entry price, and need to raise cash, it is probably best to lock the stock away in the top drawer and hope for better conditions sometime in the next few years.