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 JSW Steel Limited (NSE:JSWSTEEL), you may well want to know whether insiders have been buying or selling.
Do Insider Transactions Matter?
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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'.
The Last 12 Months Of Insider Transactions At JSW Steel
The insider Paramjit Guron made the biggest insider purchase in the last 12 months. That single transaction was for ₹4.8m worth of shares at a price of ₹184 each. Even though the purchase was made at a significantly lower price than the recent price (₹282), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
JSW Steel insiders may have bought shares in the last year, but they didn't sell any. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Have JSW Steel Insiders Traded Recently?
There was some insider buying at JSW Steel over the last quarter. insider Urmila Bhuwalka shelled out ₹515k for shares in that time. We like it when there are only buyers, and no sellers. But in this case the amount purchased means the recent transaction may not be very meaningful on its own.
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. JSW Steel insiders own about ₹11b worth of shares (which is 1.6% of the company). 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 Do The JSW Steel Insider Transactions Indicate?
It is good to see the recent insider purchase. And the longer term insider transactions also give us confidence. Once you factor in the high insider ownership, it certainly seems like insiders are positive about JSW Steel. Nice! 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. At Simply Wall St, we've found that JSW Steel has 5 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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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