We often see insiders buying up shares in companies that perform well over the long term. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So before you buy or sell UltraTech Cement Limited (NSE:ULTRACEMCO), you may well want to know whether insiders have been buying or selling.
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. 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 logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At UltraTech Cement
The Chairman Kumar Birla made the biggest insider purchase in the last 12 months. That single transaction was for ₹497m worth of shares at a price of ₹4,522 each. Although we like to see insider buying, we note that this large purchase was at significantly below the recent price of ₹6,776. Because the shares were purchased at a lower price, this particular buy doesn't tell us much about how insiders feel about the current share price.
Happily, we note that in the last year insiders paid ₹1.6b for 346.87k shares. But insiders sold 5.51k shares worth ₹34m. In the last twelve months there was more buying than selling by UltraTech Cement insiders. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
UltraTech Cement 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.
Insiders at UltraTech Cement Have Sold Stock Recently
The last three months saw significant insider selling at UltraTech Cement. In total, insiders dumped ₹9.6m worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 0.1% of UltraTech Cement shares, worth about ₹2.6b. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About UltraTech Cement Insiders?
Insiders haven't bought UltraTech Cement stock in the last three months, but there was some selling. In contrast, they appear keener if you look at the last twelve months. On top of that, insiders own a significant portion of the company. So we're not too bothered by recent selling. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that UltraTech Cement has 2 warning signs and it would be unwise to ignore these.
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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