Did Deswell Industries, Inc. (NASDAQ:DSWL) Insiders Buy Up More Shares?

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 shareholders might well want to know whether insiders have been buying or selling shares in Deswell Industries, Inc. (NASDAQ:DSWL).

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, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. 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'.

See our latest analysis for Deswell Industries

The Last 12 Months Of Insider Transactions At Deswell Industries

In the last twelve months, the biggest single purchase by an insider was when Chairman of the Board Hon Pui bought US$371k worth of shares at a price of US$2.54 per share. We do like to see buying, but this purchase was made at well below the current price of US$3.44. 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.

Hon Pui purchased 273.40k shares over the year. The average price per share was US$2.52. 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!

Deswell Industries 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

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Deswell Industries insiders own 66% of the company, currently worth about US$36m based on the recent share price. 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 Deswell Industries Insider Transactions Indicate?

The fact that there have been no Deswell Industries 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 Deswell Industries insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. In terms of investment risks, we've identified 2 warning signs with Deswell Industries and understanding these 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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