Every so often, I like to take a look to see which shares have experienced meaningful insider buying.
This is because insider buying is often regarded as a bullish indicator, as few people know a company and its intrinsic value better than its own directors.
A number of shares have reported meaningful insider buying this week. Here are a couple which have caught my eye:
Collins Foods Ltd (ASX: CKF)
According to a change of director’s interest notice, one of this quick service restaurant operator’s independent non-executive directors has been buying shares this month. The notice reveals that Christine Holman picked up her first shares since joining the board in December. Ms Holman snapped up 10,000 shares through an on-market trade on 9 July 2020 for a total consideration of $94,500. This equates to an average of $9.45 per share.
While this is great to see, it has been overshadowed by news that another non-executive director was selling a large number of shares in the days that followed. Non-executive director, Kevin Perkins, sold 300,000 shares between 10 July and 13 July for a total consideration of $2,739,880. However, it is worth noting that Mr Perkins retains a significant holding of over 7.6 million shares. The company advised that the share sale was undertaken to increase personal funds reserves.
TechnologyOne Ltd (ASX: TNE)
A change of director’s interest notice reveals that two directors have been buying this enterprise software company’s shares following the scathing research report by GMT Research. Non-executive directors Sharon Doyle and Peter Ball both dipped into the market on Tuesday to pick up 5,905 shares and 4,000 shares, respectively. Doyle paid a total of $49,312.06 for her shares, which equates to an average of $8.35 per share. Whereas Mr Ball paid a total of $33,731.04 or approximately $8.43 per share.
Earlier this week GMT Research claimed that TechnologyOne used accounting tricks to pull forward revenue and profits. It believes this led to the company inflating its FY 2019 profits by more than 200%. The company claims the allegations are false and misleading and has referred the matter to ASIC. It would appear as though these insider buys are a sign that the board is very happy with its accounting practices and sees no cause for alarm with this research report.
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Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia has recommended Collins Foods 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.