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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 shareholders might well want to know whether insiders have been buying or selling shares in Genpact Limited (NYSE:G).
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.’
View our latest analysis for Genpact
The Last 12 Months Of Insider Transactions At Genpact
Over the last year, we can see that the biggest insider sale was by General Counsel & Corporate Secretary Heather White for US$213k worth of shares, at about US$30.60 per share. So what is clear is that an insider saw fit to sell at around the current price of US$26.73. They might be selling for a variety of reasons, but it’s hard to argue this is a bullish sign. We usually pause to reflect on the potential that a stock has a high valuation, if insiders have been selling at around the current price.
Over the last year, we note insiders sold 17.53k shares worth US$539k. Over the last year we saw more insider selling of Genpact shares, than buying. The average sell price was around US$30.77. We don’t gain much confidence from insider selling near the recent share price. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. You can see the insider transactions 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!
I will like Genpact better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Does Genpact Boast High Insider Ownership?
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. It’s great to see that Genpact insiders own 0.5% of the company, worth about US$28m. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.