It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in ITC Limited (NSE:ITC).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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 ITC
The insider, Yogesh Deveshwar, made the biggest insider sale in the last 12 months. That single transaction was for ₹91m worth of shares at a price of ₹304 each. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. The silver lining is that this sell-down took place above the latest price (₹241). So it may not shed much light on insider confidence at current levels.
Over the last year we saw more insider selling of ITC shares, than buying. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like ITC better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
ITC Insiders Are Selling The Stock
The last three months saw significant insider selling at ITC. In total, insiders dumped ₹171m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Does ITC Boast High Insider Ownership?
Many investors like to check how much of a company is owned by insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that ITC insiders own 0.4% of the company, worth about ₹13b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The ITC Insider Transactions Indicate?
Insiders sold ITC shares recently, but they didn't buy any. And our longer term analysis of insider transactions didn't bring confidence, either. But it is good to see that ITC is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course ITC may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.