Need To Know: HDFC Life Insurance Company Limited (NSE:HDFCLIFE) Insiders Have Been Selling Shares

It is not uncommon to see companies perform well in the years after insiders buy shares. 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 HDFC Life Insurance Company Limited (NSE:HDFCLIFE), you may well want to know whether insiders have been buying or selling.

Do Insider Transactions Matter?

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, 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. 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'.

See our latest analysis for HDFC Life Insurance

HDFC Life Insurance Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the MD, CEO & Director, Vibha Padalkar, for ₹109m worth of shares, at about ₹621 per share. That means that even when the share price was below the current price of ₹711, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 11% of Vibha Padalkar's holding.

Insiders in HDFC Life Insurance didn't buy any shares in the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

HDFC Life Insurance Insiders Are Selling The Stock

The last three months saw significant insider selling at HDFC Life Insurance. In total, insiders dumped ₹28m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it's a good sign if insiders own a significant number of shares in the company. HDFC Life Insurance insiders own about ₹5.5b worth of shares. That equates to 0.4% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About HDFC Life Insurance Insiders?

Insiders sold stock recently, but they haven't been buying. And there weren't any purchases to give us comfort, over the last year. On the plus side, HDFC Life Insurance makes money, and is growing profits. 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. 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 HDFC Life Insurance has 1 warning sign and it would be unwise to ignore this.

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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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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