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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 shareholders might well want to know whether insiders have been buying or selling shares in Arvind Limited (NSE:ARVIND).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
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. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.'
The Last 12 Months Of Insider Transactions At Arvind
Darshil Shah made the biggest insider purchase in the last 12 months. That single transaction was for ₹6.9m worth of shares at a price of ₹346 each. That means that even when the share price was higher than ₹76.20 (the recent price), an insider wanted to purchase shares. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company's future. We always take careful note of the price insiders pay when purchasing shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
Happily, we note that in the last year insiders bought 125k shares for a total of ₹30m. While Arvind insiders bought shares last year, they didn't sell. They paid about ₹241 on average. I'd consider this a positive as it suggests insiders see value at around the current price. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Does Arvind Boast High 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. We usually like to see fairly high levels of insider ownership. From what we can see in our data, insiders own only about ₹63m worth of Arvind shares. However, it's possible that insiders might have an indirect interest through a more complex structure. It's always possible we are missing something but from our data, it looks like insider ownership is minimal.
So What Do The Arvind Insider Transactions Indicate?
The fact that there have been no Arvind insider transactions recently certainly doesn't bother us. But insiders have shown more of an appetite for the stock, over the last year. Insiders do have a stake in Arvind and their transactions don't cause us concern. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.