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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 shareholders might well want to know whether insiders have been buying or selling shares in Action Construction Equipment Limited (NSE:ACE).
What Is Insider Selling?
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.
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.'
See our latest analysis for Action Construction Equipment
The Last 12 Months Of Insider Transactions At Action Construction Equipment
Over the last year, we can see that the biggest insider purchase was by Whole-Time Director Sorab Agarwal for ₹40m worth of shares, at about ₹84.08 per share. That means that an insider was happy to buy shares at above the current price of ₹50.60. It's very possible they regret the purchase, but it's more likely they are bullish about the company. 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. The only individual insider to buy over the last year was Sorab Agarwal.
You can see the insider transactions (by individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Action Construction Equipment is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insider Ownership of Action Construction Equipment
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 Action Construction Equipment insiders own 76% of the company, worth about ₹4.8b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.