Some investors like to closely follow management buying and selling in shares as a good guide to whether a company’s scrip is good value or not.
Recently the CEO and CFO of Kogan.com Ltd (ASX: KGN) have been heavily selling down their shareholdings in the discount retailer when enthusiasm for the business could be at its strongest.
On the flip side if a CEO is buying shares in a business on market then it’s usually a solid indicator that the person with the most detailed knowledge of operating performance believes the shares are good value.
On August 29, Daniel Agostinelli, the CEO of footwear retailer Accent Group Ltd (ASX: AX1) bought 698,000 shares in the group for $1 million at $1.49 per share.
Agnostelli already has an interest in close to 23 million shares and is therefore not short of a dollar, but the size of the trade is still a vote of confidence in Accent’s future.
Part of the investment appeal is probably that the group is due to pay a 3.75 cent per share dividend this month with an ex-dividend date of September 12. After all the yield on that payment alone (2.3%+ franking credits) is probably more than you’d get leaving your cash in a savings account at the bank. On a trailing basis Accent offers a 4% annual yield plus full franking credits.
The CEO will know that it’s no use getting dividend payments if the value of your capital falls further than any dividend payments. Perking up the boss’s confidence is probably the fact that like-for-like sales across growth is 4.6% higher over the first 7 weeks of the new financial year, with margin improvement a key focus.
The same-store sales growth is all the more impressive given the weak retail environment that is hurting other bricks-and-mortar retailers, some to the point where they’re forced to close down stores such as Marcs, David Lawrence, TopShop and Gap.
Accent can still grow overseas or via new store openings in Australia and New Zealand, with its heavy investment in the online space producing sales growth of 131% over the internet in FY 2018.
At a 52-week high of $1.70 it changes hands for 19x trailing earnings of 8.78 cents per share. I’d rate the stock a hold for now, although I’d be happy to pay anything less than the $1.49 per share the CEO picked up stock for.
We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.
That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Atlassian.
We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!
You can find Tom on Twitter @tommyr345
The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.