Should You Take Comfort From Insider Transactions At South West Pinnacle Exploration Limited (NSE:SOUTHWEST)?

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 South West Pinnacle Exploration Limited (NSE:SOUTHWEST), you may well want to know whether insiders have been buying or selling.

What Is Insider Selling?

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, most countries require that the company discloses such transactions to the market.

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'.

See our latest analysis for South West Pinnacle Exploration

South West Pinnacle Exploration Insider Transactions Over The Last Year

The Chairman & MD Vikas Jain made the biggest insider purchase in the last 12 months. That single transaction was for ₹4.7m worth of shares at a price of ₹22.58 each. Even though the purchase was made at a significantly lower price than the recent price (₹43.95), we still think insider buying is a positive. Because it occurred at a lower valuation, it doesn't tell us much about whether insiders might find today's price attractive.

While South West Pinnacle Exploration insiders bought shares during the last year, they didn't sell. Their average price was about ₹19.62. It is certainly positive to see that insiders have invested their own money in the company. However, we do note that they were buying at significantly lower prices than today's share price. 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!

South West Pinnacle Exploration is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. South West Pinnacle Exploration insiders own about ₹913m worth of shares (which is 77% 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 Does This Data Suggest About South West Pinnacle Exploration Insiders?

The fact that there have been no South West Pinnacle Exploration insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like South West Pinnacle Exploration insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. 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. At Simply Wall St, we've found that South West Pinnacle Exploration has 4 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.

But note: South West Pinnacle Exploration may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE 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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