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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 we'll take a look at whether insiders have been buying or selling shares in Grindwell Norton Limited (NSE:GRINDWELL).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don't think shareholders should simply follow insider transactions. 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 Grindwell Norton
The Last 12 Months Of Insider Transactions At Grindwell Norton
In the last twelve months, the biggest single sale by an insider was when the Non-Executive Director, Mikhil Narang, sold ₹8.2m worth of shares at a price of ₹532 per share. That means that an insider was selling shares at slightly below the current price (₹598). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 3.0% of Mikhil Narang's holding. Mikhil Narang was the only individual insider to sell shares in the last twelve months.
Mikhil Narang ditched 34790 shares over the year. The average price per share was ₹541. 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 are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insider Ownership
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. 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 appears that Grindwell Norton insiders own 9.7% of the company, worth about ₹6.4b. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.