Those following along with ITC Limited (NSE:ITC) will no doubt be intrigued by the recent purchase of shares by insider Jayant Awasthi, who spent a stonking ₹63m on stock at an average price of ₹209. There's no denying a buy of that magnitude suggests conviction in a brighter future, although we do note that proportionally it only increased their holding by -200%.
ITC Insider Transactions Over The Last Year
In fact, the recent purchase by Jayant Awasthi was the biggest purchase of ITC shares made by an insider individual in the last twelve months, according to our records. That means that an insider was happy to buy shares at above the current price of ₹206. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. 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 if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
In the last twelve months insiders purchased 300.20k shares for ₹63m. But they sold 4.05m shares for ₹821m. Over the last year we saw more insider selling of ITC shares, than buying. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!
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Insider Ownership of ITC
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. It appears that ITC insiders own 0.2% of the company, worth about ₹3.9b. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The ITC Insider Transactions Indicate?
Unfortunately, there has been more insider selling of ITC stock, than buying, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. It is good to see high insider ownership, but the insider selling leaves us cautious. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. While conducting our analysis, we found that ITC has 2 warning signs and it would be unwise to ignore them.
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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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