Insider Buying: Keep These 14 Stocks on Your Watchlist 

Dear Viewers

It's been quite a volatile month for markets and indices.

Russia Ukraine crisis, inflationary pressures, Fed turning hawkish and RBI considering rate hikes...

All these are negative for stock market sentiments in the short term.

And there is no knowing when these factors will turn around, or whether they could lead to a spill over to create new disruptions on the macroeconomic front.

Now I'm not saying all this to scare you.

As I have shared in my previous videos, I'm bullish on Indian markets and economy in the long term.

Yes, markets could face further corrections in the short term... but that's for traders to obsess over.

As Graham says....

In the short run, the market is a voting machine, but in the long run, it is a weighing machine.

For long term investors, any corrections that happen in the market would be an opportunity to enter quality stocks at attractive prices.

So what are attractive prices...? Who decides what is an attractive level for the stocks.

Parameters such as return on equity, debt to equity, consistency in the profit margins, cash conversion cycle, pledging, growth in the business, management quality, cash flows comparison with earnings, and historical and current valuations are some of the tools that fundamental and bottom up focused analysts like me use to assess the quality of the business and a reasonable buying price for stock.

We all work with the information publicly available to us about the businesses, and try to connect the dots to get some sense of what future could look like for the business.

We work with imperfect and limited information available to us, multiple variables that could influence the business, and. Sometimes, unexpected variables like Covid and lockdowns get thrown into the equation, upending all the analysis.

This does not guarantee a 100 percent success. But if the process and allocation are right, there is a high chance of beating benchmark index returns by a wide margin,

There are well experienced fundamental analysts who use the same method, are earnest and yet could end up arriving at different target prices. Sometimes, the same stock may be given a Buy view by one analyst, and Sell by another analyst, based on their deductions from the same information

So who can you count on?

Especially in volatile times like this.

Well, if you have done the basic analysis, I'm going to talk about someone who help you polish your stock picking process. You get to know not just the names of the stocks to buy. But also a sense of the price at which it would make sense to buy.

That person is none other than the management or promoter of the business.

Unlike tips that you come across on the social media that could be just a front running exercise, promoter is invested in the business for the long haul, and hence, keeping a track of what they do with the stocks of the companies they own could give you interesting insights about the business in your watchlist.

Peter Lynch has said:

Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."

Of all the stakeholders, it is the Promoters who know the most about their businesses, and future potential. If they are willing to part with their personal money to buy stocks from open market, there is good possibility that they believe that the stock is undervalued, and will potentially witness gains in the future.

The good news is: You could access this data for free on BSE website.

In the next few minutes, I'll show you how and share the names of the stocks where insider buying has happened and where I believe the fundamentals are good to keep them on watchlist and dig deeper.

To begin with, click on the tab 'Corporates' on BSE website.

On the slide, this is encircled and marked by an arrow.

This will take you to a page as shown in the slide. Next, Click on Insider Trading Updates tab. This is again marked on the slide for your reference.

This will take you to the latest Insider trading updates related to Buying and Selling of shares , pledging , release of pledging etc. by all the insiders, including key management personnel, promoters, employees in the company, and so on.

The website allows a maximum of 3 months.

For this video, I have chosen a period of 3 months from 18th Feb to 18th May.

Depending on the frequency at which you do this exercise, you could choose a different interval. The maximum the website allows is 3 months.

After that, I would recommend you to download this data in excel. This option is available at the top right and marked by red circle in the slide. Excel will allow you to sort the data in multiple ways by using data filters.

Since we are interested in knowing the names where promoters have increased the stock, Under Mode of Acquisition tab (column Q on the slide), I have selected Market Purchase and Market Sale. I have used both since we want to consider companies where promoters are not acting as traders by frequently engaging in buying and selling, but are serious about consistently increasing skin in the game for the long term.

If you further arrange the securities alphabetically, you will be able to see this consistency or the lack of it.

Similarly, we can put more filters... Column C could be used to select the category of insiders whose buying activity we want to track.

Here, I have selected Director, KMP, Promoter and Promoter Group.

Under Column D, you could select the category Equity and Equity Shares

If you divide Column I by column H, i.e. value of total transactions on a specific day divided by number of shares bought or sold, you will get the stock price at which promoter has bought and sold the stock on that day. You could add that column in the excel yourself and compare that with the current stock price.

When the markets are in a volatile or correction phase, and if you have done the basic research, there is a good chance that you will end up owning a stake in the business at a better price than promoters and owners.

I would recommend you to focus on stocks with a marketcap of Rs 3 bn or more to avoid shady or low liquidity companies.

In the next slide, we will see the list of stocks which have caught my interest and I would like to keep in my watchlist.

The stocks that look good on financial parameters and are currently trading at a discount to average insider buy price include Alkem Lab. Apcotex inds, Bajaj Healthcare, Bhansali Engg Polymers, CCL Products, Deepak Nitrite, Globus Spirits, Greenply, HCL tech, International Conveyors, Kanchi Karpooram, Kwality Pharma, M,etrpolis Healthcare, and Shakti Pumps.

Please note that this list does not reflect my view on the stock. It's a starting point, and should be followed by deeper analysis. Some of these stocks could be cyclical in nature. And once you buy, you should be mindful of right exit levels too.

Let me know if you found this information useful. If you do, do press the like button and share comments. For more such updates, subscribe to Equitymaster Youtube Video Channel.

Thank you for watching. Goodbye.