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 we'll take a look at whether insiders have been buying or selling shares in Pudumjee Paper Products Limited (NSE:PDMJEPAPER).
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, 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. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
Pudumjee Paper Products Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by the Chief Financial Officer, Hanuman Birla, for ₹6.8m worth of shares, at about ₹22.57 per share. That means that even when the share price was below the current price of ₹24.85, 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. This single sale was 89% of Hanuman Birla's stake. The only individual insider seller over the last year was Hanuman Birla.
The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Pudumjee Paper Products Insiders Are Selling The Stock
We've seen more insider selling than insider buying at Pudumjee Paper Products recently. In total, Chief Financial Officer Hanuman Birla sold ₹6.8m worth of shares in that time. Meanwhile Non Executive Independent Director Madhu Dubhashi bought ₹2.2m worth , as we said above . Since the selling really does outweigh the buying, we'd say that these transactions may suggest that some insiders feel the shares are not cheap.
Does Pudumjee Paper Products Boast High Insider Ownership?
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Pudumjee Paper Products insiders own about ₹382m worth of shares. That equates to 16% of the company. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
What Might The Insider Transactions At Pudumjee Paper Products Tell Us?
The insider sales have outweighed the insider buying, at Pudumjee Paper Products, 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. 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. In terms of investment risks, we've identified 4 warning signs with Pudumjee Paper Products and understanding them should be part of your investment process.
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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