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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 we’ll take a look at whether insiders have been buying or selling shares in Aarti Drugs Limited (NSE:AARTIDRUGS).
What Is Insider Selling?
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, 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 Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.’
View our latest analysis for Aarti Drugs
Aarti Drugs Insider Transactions Over The Last Year
Jay Savla made the biggest insider sale in the last 12 months. That single transaction was for ₹14m worth of shares at a price of ₹568 each. That means that even when the share price was below the current price of ₹629, an insider wanted to cash in some shares. While sellers have a variety of reasons for selling, this isn’t particularly great to see. As a general rule we consider it to be discouraging when insiders are selling below the current price. It is worth noting that this sale was only 4.8% of Jay Savla’s holding.
Prakash Patil purchased 44.57k shares over the year. The average price per share was ₹568. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Aarti Drugs Insiders Are Selling The Stock
There was substantially more insider selling, than buying, of Aarti Drugs shares over the last three months. We note insiders cashed in ₹17m worth of shares. Meanwhile Prakash Patil bought ₹11m worth. Generally this level of net selling might be considered a bit bearish.
Insider Ownership of Aarti Drugs
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. I reckon it’s a good sign if insiders own a significant number of shares in the company. It’s great to see that Aarti Drugs insiders own 60% of the company, worth about ₹8.9b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.