We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. 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 HDFC Life Insurance Company Limited (NSE:HDFCLIFE), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
HDFC Life Insurance Insider Transactions Over The Last Year
The MD, CEO & Director, Vibha Padalkar, made the biggest insider sale in the last 12 months. That single transaction was for ₹42m worth of shares at a price of ₹564 each. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of ₹574. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it’s only a weak signal. This single sale was just 5.6% of Vibha Padalkar’s stake.
Over the last year, we can see that insiders have bought 2.77k shares worth ₹1.2m. But insiders sold 1576603 shares worth ₹709m. In total, HDFC Life Insurance insiders sold more than they bought over the last year. The sellers received a price of around ₹450, on average. It’s not too encouraging to see that insiders have sold at below the current price. Of course, the sales could be motivated for a multitude of reasons, so we shouldn’t jump to conclusions. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Insiders at HDFC Life Insurance Have Sold Stock Recently
The last quarter saw substantial insider selling of HDFC Life Insurance shares. Specifically, insiders ditched ₹11m worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Does HDFC Life Insurance Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. HDFC Life Insurance insiders own about ₹10b worth of shares (which is 0.9% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The HDFC Life Insurance Insider Transactions Indicate?
Insiders haven’t bought HDFC Life Insurance stock in the last three months, but there was some selling. And our longer term analysis of insider transactions didn’t bring confidence, either. On the plus side, HDFC Life Insurance makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn’t make us feel confident about the company. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Main Source - Simplywall