We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Larsen & Toubro Limited (NSE:LT).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.'
Larsen & Toubro Insider Transactions Over The Last Year
In the last twelve months, the biggest single sale by an insider was when the , S. KOTHARY, sold ₹21m worth of shares at a price of ₹1,440 per share. So what is clear is that an insider saw fit to sell at around the current price of ₹1,410. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. In this case, the big sale took place at around the current price, so it's not too bad (but it's still not a positive).
All up, insiders sold more shares in Larsen & Toubro than they bought, over the last year. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Larsen & Toubro Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Larsen & Toubro shares. In total, insiders dumped ₹45m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.
Insider Ownership of Larsen & Toubro
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. I reckon it's a good sign if insiders own a significant number of shares in the company. It appears that Larsen & Toubro insiders own 0.3% of the company, worth about ₹5.3b. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Larsen & Toubro Tell Us?
Insiders haven't bought Larsen & Toubro stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. But it is good to see that Larsen & Toubro is growing earnings. 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. 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.
But note: Larsen & Toubro may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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