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 we'll take a look at whether insiders have been buying or selling shares in Sterlite Technologies Limited (NSE:STRTECH).
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.
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 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'.
Sterlite Technologies Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the insider, Pramod Srivastava, for ₹10m worth of shares, at about ₹397 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (₹114). So it is hard to draw any strong conclusion from it.
Happily, we note that in the last year insiders paid ₹14m for 71846 shares. But insiders sold 168k shares worth ₹54m. Over the last year we saw more insider selling of Sterlite Technologies shares, than buying. They sold for an average price of about ₹323. Insider selling doesn't make us excited to buy. But we note that the selling, on average, was at well above the recently traded price of ₹114. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Sterlite Technologies Have Sold Stock Recently
The last three months saw some Sterlite Technologies insider selling. Insiders sold just ₹2.4m worth of shares in that time. Neither the lack of buying nor the presence of selling is heartening. But the amount sold isn't enough for us to put any weight on it.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. 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 2.8% of Sterlite Technologies shares, worth about ₹1.3b. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Sterlite Technologies Tell Us?
Insiders sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. But since Sterlite Technologies is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Sterlite Technologies.
Of course Sterlite Technologies 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.