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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 Precision Camshafts Limited (NSE:PRECAM).
Do Insider Transactions Matter?
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 don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
See our latest analysis for Precision Camshafts
The Last 12 Months Of Insider Transactions At Precision Camshafts
Chairman & MD Yatin Shah made the biggest insider purchase in the last 12 months. That single transaction was for ₹10m worth of shares at a price of ₹69.64 each. That means that an insider was happy to buy shares at above the current price of ₹59.05. Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock when an insider has bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Yatin Shah was the only individual insider to buy over the year.
Yatin Shah bought 243k shares over the last 12 months at an average price of ₹73.85. 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!
Precision Camshafts is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Insider Ownership of Precision Camshafts
Many investors like to check how much of a company is owned by insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. Precision Camshafts insiders own 62% of the company, currently worth about ₹3.5b based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.