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We often see insiders buying up shares in companies that perform well over the long term. 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 before you buy or sell AIA Engineering Limited (NSE:AIAENG), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
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, 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 Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
Check out our latest analysis for AIA Engineering
AIA Engineering Insider Transactions Over The Last Year
MD & Executive Director Bhadresh Shah made the biggest insider sale in the last 12 months. That single transaction was for ₹4.2b worth of shares at a price of ₹1,394 each. That means that an insider was selling shares at slightly below the current price (₹1,661). While sellers have a variety of reasons for selling, this isn't particularly great to see. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price. Please note, however, that this single sale was just 5.2% of Bhadresh Shah's stake.
In the last twelve months insiders netted ₹4.2b for 3.00m shares sold. In total, AIA Engineering insiders sold more than they bought over the last year. The sellers received a price of around ₹1,395, on average. It's not ideal to see that insiders have sold at around the current price. Since insiders sell for many reasons, we wouldn't put too much weight on it. 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 like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Does AIA Engineering Boast High Insider Ownership?
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. We usually like to see fairly high levels of insider ownership. It's great to see that AIA Engineering insiders own 59% of the company, worth about ₹92b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About AIA Engineering Insiders?
The fact that there have been no AIA Engineering insider transactions recently certainly doesn't bother us. It's great to see high levels of insider ownership, but looking back at the last year, we don't gain confidence from the AIA Engineering insiders selling. 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: AIA Engineering 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.