We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Granules India Limited (NSE:GRANULES), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Granules India
Over the last year, we can see that the biggest insider sale was by the Chairman & MD, Krishna Chigurupati, for ₹505m worth of shares, at about ₹101 per share. So we know that an insider sold shares at around the present share price of ₹92.45. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. Given that the sale took place at around current prices, it makes us a little cautious but is hardly a major concern.
Happily, we note that in the last year insiders paid ₹3.4m for 36700 shares. On the other hand they divested 5.1m shares, for ₹507m. Over the last year we saw more insider selling of Granules India shares, than buying. You can see the insider transactions (by 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!
I will like Granules India better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Granules India Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Granules India insiders own about ₹11b worth of shares (which is 45% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Granules India Tell Us?
There haven't been any insider transactions in the last three months -- that doesn't mean much. It's great to see high levels of insider ownership, but looking back at the last year, we don't gain confidence from the Granules India insiders selling. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Granules India.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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.
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.
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. Thank you for reading.