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 we'll take a look at whether insiders have been buying or selling shares in HDFC Asset Management Company Limited (NSE:HDFCAMC).
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, rules govern insider transactions, and certain disclosures are required.
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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.
HDFC Asset Management Insider Transactions Over The Last Year
The Chief Investment Officer, Prashant Jain, made the biggest insider sale in the last 12 months. That single transaction was for ₹537m worth of shares at a price of ₹2,489 each. So it's clear an insider wanted to take some cash off the table, even below the current price of ₹3,093. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 24% of Prashant Jain's holding.
In the last year HDFC Asset Management insiders didn't buy any company stock. You can see a visual depiction of insider transactions (by companies and 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!
I will like HDFC Asset Management better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
HDFC Asset Management Insiders Are Selling The Stock
The last quarter saw substantial insider selling of HDFC Asset Management shares. Specifically, insiders ditched ₹691m 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 insiders think that the shares are a bargain.
Does HDFC Asset Management 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. A high insider ownership often makes company leadership more mindful of shareholder interests. HDFC Asset Management insiders own 2.5% of the company, currently worth about ₹17b 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 HDFC Asset Management Insiders?
Insiders sold stock recently, but they haven't been buying. Looking to the last twelve months, our data doesn't show any insider buying. But it is good to see that HDFC Asset Management is growing earnings. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. 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. Every company has risks, and we've spotted 2 warning signs for HDFC Asset Management you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
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