We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 we'll take a look at whether insiders have been buying or selling shares in Deswell Industries, Inc. (NASDAQ:DSWL).
Do Insider Transactions Matter?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a 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'.
Deswell Industries Insider Transactions Over The Last Year
The Chairman of the Board Hon Pui made the biggest insider purchase in the last 12 months. That single transaction was for US$371k worth of shares at a price of US$2.54 each. So it's clear an insider wanted to buy, at around the current price, which is US$2.81. Of course they may have changed their mind. But this suggests they are optimistic. While we always like to see insider buying, it's less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. Happily, the Deswell Industries insider decided to buy shares at close to current prices. Hon Pui was the only individual insider to buy during the last year.
Hon Pui bought 379.61k shares over the last 12 months at an average price of US$2.54. 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!
Deswell Industries is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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. It's great to see that Deswell Industries insiders own 66% of the company, worth about US$29m. 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 Deswell Industries Insiders?
The recent insider purchase is heartening. And the longer term insider transactions also give us confidence. However, we note that the company didn't make a profit over the last twelve months, which makes us cautious. When combined with notable insider ownership, these factors suggest Deswell Industries insiders are well aligned, and quite possibly think the share price is too low. One for the watchlist, at least! So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 2 warning signs for Deswell Industries that deserve your attention before buying any shares.
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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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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