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 IDFC First Bank Limited (NSE:IDFCFIRSTB).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the 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 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.
The Last 12 Months Of Insider Transactions At IDFC First Bank
The insider, Apul Nayyar, made the biggest insider sale in the last 12 months. That single transaction was for ₹115m worth of shares at a price of ₹41.45 each. So we know that an insider sold shares at around the present share price of ₹39.70. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
Happily, we note that in the last year insiders paid ₹140m for 3315381 shares. On the other hand they divested 4197875 shares, for ₹173m. In total, IDFC First Bank insiders sold more than they bought over the last year. 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 IDFC First Bank better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insiders at IDFC First Bank Have Bought Stock Recently
There was some insider buying at IDFC First Bank over the last quarter. In that period insiders spent ₹5.3m on shares. But insider E. Narayanan sold ₹4.5m worth. It is nice to see that insiders have bought, but the quantum isn't large enough to get us excited.
Insider Ownership of IDFC First Bank
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 1.5% of IDFC First Bank shares, worth about ₹2.8b. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.
So What Does This Data Suggest About IDFC First Bank Insiders?
The recent insider purchases are heartening. However, the longer term transactions are not so encouraging. Overall, we'd prefer see a more sustained buying from directors, but with a significant insider holding and more recent purchases, IDFC First Bank insiders are reasonably well aligned, and optimistic for the future. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for IDFC First Bank.
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.
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