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 we'll take a look at whether insiders have been buying or selling shares in Balaji Amines Limited (NSE:BALAMINES).
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, such insiders must disclose their trading activities, and not trade on inside information.
We don't think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Balaji Amines Insider Transactions Over The Last Year
Notably, that recent purchase by Executive Chairman Ande Reddy was not the only time they bought Balaji Amines shares this year. Earlier in the year, they paid ₹395 per share in a ₹5.2m purchase. That means that even when the share price was higher than ₹310 (the recent price), an insider wanted to purchase shares. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares is very important. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.
Happily, we note that in the last year insiders bought 74110 shares for a total of ₹24m. In the last twelve months Balaji Amines insiders were buying shares, but not selling. Their average price was about ₹323. I'd consider this a positive as it suggests insiders see value at around the current price. You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Balaji Amines is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Balaji Amines Insiders Bought Stock Recently
Over the last three months, we've seen significant insider buying at Balaji Amines. In total, insiders bought ₹9.9m worth of shares in that time, and we didn't record any sales whatsoever. This makes one think the business has some good points.
Does Balaji Amines Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Balaji Amines insiders own 57% of the company, currently worth about ₹5.7b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Balaji Amines Insiders?
It's certainly positive to see the recent insider purchases. We also take confidence from the longer term picture of insider transactions. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Balaji Amines. One for the watchlist, at least! I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.