We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Ashok Leyland Limited (NSE:ASHOKLEY), 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 in the company. 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 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'.
The Last 12 Months Of Insider Transactions At Ashok Leyland
In the last twelve months, the biggest single sale by an insider was when the Chief Operating Officer, Anuj Kathuria, sold ₹4.6m worth of shares at a price of ₹91.70 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of ₹125. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 26% of Anuj Kathuria's holding.
Insiders in Ashok Leyland didn't buy any shares in the last year. 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!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. We usually like to see fairly high levels of insider ownership. Our information indicates that Ashok Leyland insiders own about ₹19m worth of shares. However, it's possible that insiders might have an indirect interest through a more complex structure. This level of insider ownership is notably low, and not very encouraging.
What Might The Insider Transactions At Ashok Leyland Tell Us?
The fact that there have been no Ashok Leyland insider transactions recently certainly doesn't bother us. Our analysis of Ashok Leyland insider transactions leaves us cautious. The modest level of insider ownership is, at least, some comfort. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To that end, you should learn about the 3 warning signs we've spotted with Ashok Leyland (including 2 which are potentially serious).
Of course Ashok Leyland may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
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.
When trading Ashok Leyland or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.