We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 Edelweiss Financial Services Limited (NSE:EDELWEISS), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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 Edelweiss Financial Services
Over the last year, we can see that the biggest insider sale was by Raviprakash Bubna for ₹129m worth of shares, at about ₹257 per share. Although we don’t gain confidence from insider selling, we note that this large sale was at well above current price of ₹197. So it may not tell us anything about how insiders feel about the current share price.
Over the last year, we can see that insiders have bought 60.00k shares worth ₹10m. But they sold 2.66m for ₹691m. Over the last year we saw more insider selling of Edelweiss Financial Services shares, than buying. The average sell price was around ₹260. We are not joyful about insider selling. However, we do note that the average sale price was significantly higher than the current share price (which is ₹197). You can see a visual depiction of insider transactions (by individuals) over the last 12 months, 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).
Edelweiss Financial Services Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Edelweiss Financial Services. In total, Raviprakash Bubna sold ₹136m worth of shares in that time, and we didn’t record any purchases whatsoever. In light of this it’s hard to argue that all the directors think that the shares are a bargain.
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. A high insider ownership often makes company leadership more mindful of shareholder interests. It’s great to see that Edelweiss Financial Services insiders own 39% of the company, worth about ₹71b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Edelweiss Financial Services Tell Us?
An insider sold Edelweiss Financial Services shares recently, but they didn’t buy any. And our longer term analysis of insider transactions didn’t bring confidence, either. But since Edelweiss Financial Services is profitable and growing, we’re not too worried by this. The company boasts high insider ownership, but we’re a little hesitant, given the history of share sales. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Edelweiss Financial Services.
But note: Edelweiss Financial Services 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.