Many investors like to closely follow director or senior management buying and selling in their company’s shares for obvious reasons.
After all you cannot get a better signal as to which way a company’s share price is likely to head than whether its senior employees are buying or selling its shares.
In fairness directors or C-suite members may sell shares for any number of reasons, for example they may have to settle a divorce, buy a super-yacht, or just have to meet their tax obligations.
However, in theory at least they should only buy shares one reason.
Because they think the share price is going to go up.
One company where directors have regularly bought up shares with a rising share price to match is Dicker Data Ltd (ASX: DRR).
In particular its own chief operating officer Vladimir Mitnovetski has regularly added to his own already substantial holdings in the IT hardware distributor. Just today he bought another 15,000 shares to take his total holding close to 700,000 shares. While another director also bought more shares on market.
Generally, I’d opine that where a COO is adding more to an already existing holding it’s an even more bullish signal than where a non-exec director is just buying a few shares in a company where they’ve just joined the board.
For investors, Dicker Data is already forecasting another year of double digit profit growth in calendar 2019 and should offer a forward yield of 4.5% based on an estimate of 22 cents per share in dividends over the next 12 months. Please note this is only an estimate but likely to be reasonable accurate as a guide.
If we estimate that Dicker Data earns around 23 cents per share in calendar 2019 we can see that it trades on 21x forward earnings. This is not going to impress the value investors, but is reasonable for a company posting consistent double-digit profit growth and boasting a 4.5% yield.
Moreover, insiders continue to snap up the stock. As such if I wasn’t already “overweight” Dicker Data I’d be a buyer of more stock at $4.87.
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Motley Fool contributor Tom Richardson owns shares of Dicker Data Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. 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.