Did Ambika Cotton Mills Limited (NSE:AMBIKCO) Insiders Buy Up More Shares?

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 shareholders might well want to know whether insiders have been buying or selling shares in Ambika Cotton Mills Limited (NSE:AMBIKCO).

What Is Insider Selling?

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'.

See our latest analysis for Ambika Cotton Mills

The Last 12 Months Of Insider Transactions At Ambika Cotton Mills

The Chairman & MD Puthan Chandran made the biggest insider purchase in the last 12 months. That single transaction was for ₹6.9m worth of shares at a price of ₹863 each. That means that even when the share price was higher than ₹658 (the recent price), an insider wanted to purchase shares. It's very possible they regret the purchase, but it's more likely they are bullish about the company. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Puthan Chandran was the only individual insider to buy during the last year.

Puthan Chandran bought 10.00k shares over the last 12 months at an average price of ₹871. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

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

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Ambika Cotton Mills insiders own 53% of the company, currently worth about ₹2.0b based on the recent share price. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Does This Data Suggest About Ambika Cotton Mills Insiders?

It doesn't really mean much that no insider has traded Ambika Cotton Mills shares in the last quarter. However, our analysis of transactions over the last year is heartening. Judging from their transactions, and high insider ownership, Ambika Cotton Mills insiders feel good about the company's future. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Ambika Cotton Mills. Every company has risks, and we've spotted 3 warning signs for Ambika Cotton Mills (of which 1 is concerning!) you should know about.

But note: Ambika Cotton Mills 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. We currently account for open market transactions and private dispositions, but not derivative transactions.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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