Insider buying is often regarded as a bullish indicator, as few people should know a company better than its own directors.
The theory is that if they have the confidence to buy shares, it could be a sign that things are going well and they expect them to appreciate in value.
After all, you wouldn't invest in something you thought was about to depreciate in value, as that would be money down the drain.
In light of this, it might be worth paying attention to a recent insider purchase of shares in the Australian banking sector.
What has happened?
According to a change of director's interest notice, one of the non-executive directors at Westpac Banking Corp (ASX: WBC) has been buying shares this month.
The note reveals that Steven John Harker has picked up his first parcel of shares since joining the bank in March.
Mr Harker bought 10,365 shares through an on-market trade on July 25 for an average of $28.8455 per share. This equates to a total consideration of approximately $300,000.
Who is Steven Harker?
Mr Harker was formerly the managing director and chief executive officer of Morgan Stanley Australia from 1998 to 2016, before then becoming its vice chairman until February 2019.
Prior to joining Morgan Stanley, he spent fifteen years with Barclays de Zoete Wedd, which is now known as Barclays Investment Bank.
Should you invest?
With the outlook for the banking sector improving greatly in recent weeks following APRA's decision to loosen lending rules and the housing market showing major signs of improvement, I think that it could be worth following the lead of Mr Harker by buying Westpac's shares if you don't already have meaningful exposure to the banking sector.
