The first question that we ask ourselves when analyzing a small low cap company is how much of the company’s shares are  owned by the officers and directors of  the company. What is the percentage? The more the better. We study the history of  the “insider” purchases…how many shares were bought recently? Has there been any recent selling? Are Insiders (officers) often buying at specific price levels?

Monitoring the purchases and sales of the officers at the companies where they work is often an exceptional indicator that their stocks  are either undervalued or overvalued. Insider buying and selling by the officers of a publicly traded stock can at times be a most valuable indicator for the direction of a stock. In the past, we have found consistent insider buying it to be indicative of undervaluation.

 

Very few people understand that there is very little comprehensive research for small capitalization stocks including the “junior” exploration and mining companies. Thus, the analysis of the companies’ officers’ purchases and sales can be the only research indicator available. It is not a perfect indicator but it certainly is worth paying attention to when used in conjunction with intensive fundamental analysis.

Two companies that have shown exceptional buying by their CEO’s and other officers  indicate in our opinion that the emphasis is not their own salaries but as large shareholders the successful price performance of their companies’ common stocks.

  Insider buying at Cartier “ECR” & Golden Share “GSH”  

Golden Share  Resources, symbol “GSH” TSX Venture, .21 cents is a minerals exploration company with a concentration on a “vanadium based  battery” which may offer significant commercial potential for electric storage. Moreover, the company has two gold projects in Ontario. However, we find the vanadium based  battery project to be particularly interesting. It can be described as at an advanced research stage, similar to “ a speculation window between pre-discovery to discovery” in the exploration business. It could be quite rewarding although it is  without a defined timetable at present. Yes, there it is a “wait for further laboratory testing results” involved which cannot be determined at present.

 

At Golden Share, the President and CEO Nick Zeng has been a consistent buyer of “GSH” shares as verified on SEDI.  He now owns approximately 2,200,000 shares (about 5.5%) which he bought mainly at various prices in the open market. His average cost by my calculations is in the range of approximately .27 cents a share. His investment is among the highest by an insider that we find on the TSXV.

Cartier Resources is a Val D’or, Quebec based mineral exploration company that trades on the TSX Venture Exchange. Its three main projects are located in the mineral-rich Abitibi Greenstone Belt in Quebec. Cartier’s  strategy has been to focus their exploration in areas where gold has been found and mined before and where the required infrastructure to bring a mine into production cost effectively is already in place. Management’s primary focus has been to enhance the value of Cartier Resources.

 

Cartier Resources, symbol “ECR”  .15 cents shows consistently heavy insider buying by its president Philippe Cloutier over the last ten years. We noted that he purchased Cartier shares at prices from as high as one .90 cents all the way down to .05 cents per share. He now owns 3,353,000 shares of Cartier at an average of .17 cents. It is among the highest amounts of purchases by a CEO in the junior sector. While the market may be missing an undervalued situation, Agnico purchased 20% of the company over a year ago. Evidently somebody saw potential value there, that somebody was a multi-billion dollar capitalization New York Stock Exchange and Toronto Stock Exchange listed mining company.

Insider analysis is not a perfect method of analysis but it is a valuable tool that used in combination with other fundamental indicators can result in accumulating stocks at or near their price bottoms.  There is no perfect method of stock analysis but there are certain ”tools” that in our view demand their use.

 

Thinking is a very difficult occupation and that is why so few people ever engage in it.                                                                                                      Henry Ford, American Industrialist