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It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Carborundum Universal Limited (NSE:CARBORUNIV), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
Check out our latest analysis for Carborundum Universal
The Last 12 Months Of Insider Transactions At Carborundum Universal
Over the last year, we can see that the biggest insider purchase was by Executive Vice President of Human Resources M. Muthiah for ₹174m worth of shares, at about ₹355 per share. So it’s clear an insider wanted to buy, at around the current price. 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. We generally consider it a positive if insiders have been buying on market, even if the share price has increased a bit since then.
Happily, we note that in the last year insiders paid ₹348m for 979.20k shares. On the other hand they divested 1.04m shares, for ₹370m. Over the last year we saw more insider selling of Carborundum Universal shares, than buying. The sellers received a price of around ₹355, on average. It’s not too encouraging to see that insiders have sold at below the current price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Insider Ownership
Many investors like to check how much of a company is owned by insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. It appears that Carborundum Universal insiders own 9.0% of the company, worth about ₹6.2b. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.