It is not uncommon to see companies perform well in the years after insiders buy shares. 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 Sharda Motor Industries Limited (NSE:SHARDA), you may well want to know whether insiders have been buying or selling.
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.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. 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.
View our latest analysis for Sharda Motor Industries
Sharda Motor Industries Insider Transactions Over The Last Year
MD, CEO & Executive Director Ajay Relan made the biggest insider purchase in the last 12 months. That single transaction was for ₹7.4m worth of shares at a price of ₹1,643 each. So it's clear an insider wanted to buy, even at a higher price than the current share price (being ₹949). 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. To us, it's very important to consider the price insiders pay for shares. Generally speaking, it catches our eye when an insider has purchased shares at above current prices, as it suggests they believed the shares were worth buying, even at a higher price. Ajay Relan was the only individual insider to buy shares in the last twelve months.
Ajay Relan purchased 6922 shares over the year. The average price per share was ₹1,537. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).
Insider Ownership of Sharda Motor Industries
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. It's great to see that Sharda Motor Industries insiders own 78% of the company, worth about ₹4.5b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.