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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 we'll take a look at whether insiders have been buying or selling shares in PSP Projects Limited (NSE:PSPPROJECT).
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 don't think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
PSP Projects Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider purchase was by Chairman Prahaladbhai Patel for ₹50m worth of shares, at about ₹500 per share. That means that even when the share price was higher than ₹470 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. In our view, the price an insider pays for shares is very important. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Prahaladbhai Patel was the only individual insider to buy shares in the last twelve months.
Prahaladbhai Patel bought a total of 342k shares over the year at an average price of ₹470. 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!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Insider Ownership of PSP Projects
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. PSP Projects insiders own about ₹12b worth of shares (which is 73% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At PSP Projects Tell Us?
It doesn't really mean much that no insider has traded PSP Projects shares in the last quarter. But insiders have shown more of an appetite for the stock, over the last year. With high insider ownership and encouraging transactions, it seems like PSP Projects insiders think the business has merit. Of course, the future is what matters most. So if you are interested in PSP Projects, you should check out this free report on analyst forecasts for the company.
Of course PSP Projects may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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 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.