4 Stocks with High Level of Insider Buying. But is it a Good Sign?

Charity begins at home.

Similarly, investment also begins at home. Suppose I want to start a new business and need capital of Rs 1 m. I come to you and ask for money.

No matter how good my business is or how profitable it may seem, your first question will be, "How much money are 'you' bringing in?"

And that's how it should be.

If I do not trust the business to do well, why would anyone else trust me?

Similarly, if a company plans to raise funds through the issue of share capital, then investors would ask, "What is the promoter's holding in the company?"

The promoter's holding indicates the promoter's trust in the company. If promoters trust the company will fetch them high returns, they would have a high investment in the company.

Hence, if your investment goal is investing in fundamentally strong stocks, make sure the company has a high promoter holding.

Today, we take a look at the four companies that have witnessed the highest promoter buying or insider buying in the past few quarters.

Read on to find out which four companies have the highest insider buying...

#1 JSW Steel

JSW Steel is an Indian multinational steel-making company based in Mumbai and a part of the JSW Group. After the merger of ISPAT Steel, JSW Steel became India's second-largest private sector steel company.

To know more about the company check out its factsheet and quarterly results.

Changes in shareholding pattern

Over the past four quarters, promoters have gradually increased their stake in JSW Steel. Promoter holding in June 2021 was 44% which increased to 45% by June 2022.

The promoters have increased their stake by 1% in the past 12 months. The share price of JSW Steel has fallen around 12% on YTD basis. Hence, it looks like promoters are buying the dip.

Check out JSW Steel's latest shareholding pattern.

JSW steel accounts for around 12% of total carbon dioxide emissions in India. Globally it is responsible for around 8% of the total carbon dioxide emissions.

JSW Steel realised the need of the hour. Hence, it plans on reducing its carbon emission by 42% by 2029-30, with 2005 as the base year for comparison. This is in line with India's goal that India's top renewable energy companies are already working on extensively.

To achieve this reduction JSW Steel on 18 July 2022, entered into a partnership with the Boston Consultancy Group (BCG) group to meet its decarbonisation goals.

This collaboration focuses on applying digital and analytics to track, measure, simulate and enhance the company's environmental performance.

Yesterday, JSW Steel reported a consolidated net profit of Rs 8.4 bn for the quarter ended June 2022. This was 85.8% lower than Rs 59 bn which it reported in the same quarter last year.

In an exchange filing, the company said its net debt to equity ratio stood at 0.98 times at the end of June quarter. This compared with 0.83 times at the end of the March quarter. A significant portion of increase in debt was mainly due to locking up of working capital in inventory.

For more details, check out JSW Steel news and analysis.

#2 Shriram Transport

Established in 1979, Shriram Transport Finance is one of the largest players in Indian commercial vehicle finance.

The company has a niche presence in financing pre-owned trucks for Small Truck Owners (STOs). It has a network of 1,585 branches and 856 rural centres, and a tie-up with over 500 private financiers across the country.

To know more about the company, check out its factsheet and quarterly results.

Changes in shareholding pattern

Promoters of Shriram Transport have been buying shares of the company to a large extent. In June 2021, the promoter's total shareholding was 25.1% and now in June 2022, its promoter holding stands at 29.3%.

The promoters have increased their stake by 4% in the past 12 months.

2022 was the year of volatility for share markets. Almost all companies, big or small, have been knocked out clean by the punch of global downfall, but amidst this, the share price of Shriram Transport rose around 17% on a YTD basis.

Check out Shriram Transport's shareholding pattern.

On 11 March 2022, Shriram Transport announced a merger of Shriram City with Shri Transport. The merger will create synergy benefits. As a result of this merger, Shriram Transport will become one of the largest NBFCs in India.

The said merger was approved by RBI on 16 June 2022. The shareholders and creditors finally approved the merger on 6 July 2022. The merger will be completed in two-three months now.

For more details, check out Shriram Transport news and analysis.

#3 Star Cement

As the name suggests, Star Cement is a star cement manufacturing company in northeast India. The company plant is spread across 200 hectares of land in Lumshnong, a strategic location at Meghalaya that ensures easy availability of high-grade limestone.

The company has received BIS License for the products being sold in the market. The company has developed a good image in the market since the launch of the product due to its superior quality.

To know more about the company, check out its factsheet and quarterly results.

Changes in shareholding in pattern

In June 2021, the promoter's total shareholding was 66.2% and now in June 2022, its promoter holding stands at 67.4%.

The promoters have increased their stake by 1.2% in the past 12 months. Whereas the share price of Star Cement has fallen around 9% on a YTD basis.

Check out Star Cement's latest shareholding pattern.

For more details, check out Star Cement news and analysis.

#4 Kabra Extrusion

Kabra Extrusiontechnik, a part of the Kolsite group, is a leading manufacturer of plastic extrusion machinery in India.

It offers a wide range of hi-tech sophisticated single and twin screw extrusion lines for pipes, profiles, pellets, and PO pipelines for HDPE/PPR, teleduct, mono, and multilayer blown films.

To know more about the company, check out its factsheet and quarterly results.

Changes in shareholding in pattern

In December 2020, the promoter's total shareholding was 58% and now, in June 2022 its promoter holding stands at 60.4%.

The promoters have increased their stake by 2.4%.

Whereas the share price of Kabra Extrusion has fallen around 22% on a YTD basis. It appears promoters are buying the dip and making the most of the market correction as Indian share markets are falling.

Check out Kabra Extrusion's shareholding pattern.

On a standalone basis, for financial year 2021-22, Kabra Extrusion reported total revenue of Rs 4,081 m. For the year ago period, its total revenue was 2,790 m. The revenue increased by 46% in a year.

Standalone net profit for fiscal 2022 stood at Rs 3,005 m. The net profit for fiscal 2021 was Rs 2,418.7 m. Thus, net profit rose by 24%.

Kabra Extrusion is one of those companies which pivoted their business and thrived.

However, in the financial year 2021, the company decided to venture into the electric vehicle (EV) segment via its battery division, Battrixx.

Led by various government initiatives/incentives, an increase in fuel prices & environmental concerns, demand and consumer awareness for electric mobility has gone up. The same is reflected in high demand for electric vehicles (EV).

For more details, check out Kabra Extrusion news and analysis.

Why high promoter holding is a big positive

It can be seen that a volatile market does not necessarily mean bad news for the company. The promoters of these companies saw the volatility as an opportunity to increase their stake.

An increased promoter stake in the company is perceived to be a sign of trust among the investors. However, this factor should not be considered in isolation.

Insider buying can also be a way to prevent the share price from falling further. An investor should perform a complete swot analysis for stocks before deciding which stock to buy.

The volatility of the markets also cannot be ignored. Trends cannot be predicted in these complex times. Companies with strong fundamentals are also facing a downfall.

Hence considering all the above reasons, an investor should be extra careful while investing.

Since you're interested in tracking promoter buying, check out Equitymaster's powerful stock screener.

This tool tracks the companies where promoters are increasing stake.

Also check out the below video where Richa Agarwal talks about insider buying and the stocks to keep on your watchlist.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...