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We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Deswell Industries, Inc. (NASDAQ:DSWL), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Deswell Industries
In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board Pui Lau bought US$276k worth of shares at a price of US$2.60 per share. That means that an insider was happy to buy shares at above the current price of US$2.32. It's very possible they regret the purchase, but it's more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Pui Lau was the only individual insider to buy during the last year.
Pui Lau purchased 170.34k shares over the year. The average price per share was US$2.72. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Deswell Industries is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Does Deswell Industries Boast High Insider Ownership?
For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Deswell Industries insiders own 64% of the company, currently worth about US$23m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Deswell Industries Insiders?
Insider purchases may have been minimal, in the last three months, but there was no selling at all. Overall the buying isn't worth writing home about. But insiders have shown more of an appetite for the stock, over the last year. Judging from their transactions, and high insider ownership, Deswell Industries insiders feel good about the company's future. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. While conducting our analysis, we found that Deswell Industries has 3 warning signs and it would be unwise to ignore them.
But note: Deswell Industries may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.