We often see insiders buying up shares in companies that perform well over the long term. 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 shareholders might well want to know whether insiders have been buying or selling shares in Coromandel International Limited (NSE:COROMANDEL).
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 on the market. 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.’
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The Last 12 Months Of Insider Transactions At Coromandel International
Over the last year, we can see that the biggest insider sale was by Meenakshi Murugappan for ₹170m worth of shares, at about ₹450 per share. That means that an insider was selling shares at below the current price (₹456). While their view may have changed since they sold, this isn’t a particularly bullish sign. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was 99.1% of Meenakshi Murugappan’s stake.
In the last twelve months insiders netted ₹265m for 581.88k shares sold. In total, Coromandel International insiders sold more than they bought over the last year. The average sell price was around ₹455. We don’t gain much confidence from insider selling near the recent share price. But we don’t put too much weight on the insider selling, since sellers could have personal reasons. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Coromandel International Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Coromandel International. Specifically, insiders ditched ₹238m 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.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 1.4% of Coromandel International shares, worth about ₹2.0b. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.
So What Do The Coromandel International Insider Transactions Indicate?
Insiders haven’t bought Coromandel International stock in the last three months, but there was some selling. Looking to the last twelve months, our data doesn’t show any insider buying. On the plus side, Coromandel International makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Coromandel International.
Of course Coromandel International may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.