We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in Aavas Financiers Limited (NSE:AAVAS).
What Is Insider Buying?
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.
Insider transactions are not the most important thing when it comes to long-term investing. 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'.
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The Last 12 Months Of Insider Transactions At Aavas Financiers
In the last twelve months, the biggest single sale by an insider was when the CEO & Whole Time Director, Sushil Agarwal, sold ₹331m worth of shares at a price of ₹1,407 per share. That means that an insider was selling shares at slightly below the current price (₹1,449). We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 7.3% of Sushil Agarwal's holding.
In total, Aavas Financiers insiders sold more than they bought over the last year. 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!
I will like Aavas Financiers better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Aavas Financiers Insiders Are Selling The Stock
The last three months saw significant insider selling at Aavas Financiers. In total, insiders dumped ₹671m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does Aavas Financiers Boast High Insider Ownership?
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Aavas Financiers insiders own 6.2% of the company, worth about ₹7.1b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Does This Data Suggest About Aavas Financiers Insiders?
Insiders sold Aavas Financiers shares recently, but they didn't buy any. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Aavas Financiers makes money, and is growing profits. It is good to see high insider ownership, but the insider selling leaves us cautious. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Aavas Financiers.
But note: Aavas Financiers 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.
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.