When a company director or insider buys shares in their own business, does that mean it's a good time to buy in? We take a look at two ASX industrial shares with recent director buys.
What is insider buying?
Insider buying is when an executive, such as a director, buys shares in their own company. Insiders usually have exclusive insight into the companies they manage and are more likely to buy shares they view as undervalued.
A share purchase by a company insider can be seen as a vote of confidence in a business. And the signals are stronger with multiple insider buys and larger share purchases.
Let's look at 2 ASX industrial shares that have seen multiple insider buys recently.
Phoslock Environmental Technologies Ltd (ASX: PET)
The Phoslock share price dropped sharply at the end of July when the water treatment company revealed a substantial decline in first half revenues due to project delays.
Flooding and COVID-19 impacts affected progress on key projects, although the company says it is well-positioned to restart when circumstances improve. Two directors took advantage of the downturn to top up their shareholdings, purchasing 150,000 shares in the ASX industrial share in early August.
While projects in China and Europe have been delayed, Phoslock believes they will continue in due course. The company says the pipeline remains strong with a current contract value of $380 million. Many projects have been unaffected by the coronavirus pandemic and Phoslock has confidence in developing US activity.
Downer EDI Limited (ASX: DOW)
Downer EDI launched a $400 million equity raising at the end of July after warning of an expected $150–$160 million statutory loss for FY20. The company attributes the loss primarily to impairments, remediations, and historical claims adjustments. Downer EDI's share price fell to a low of $4.02 in early August, prompting one director to buy 10,470 shares on-market.
The ASX industrial share reported that cash performance improved materially in 2H FY20 despite the impacts of COVID-19. Underlying EBITDA is expected to be $410–$410 million, and underlying net profit after tax adjusted $210–$220 million.
Downer is conducting a takeover bid for Spotless, which is a key part of its urban services strategy. Funds from the equity raising will help pay for the acquisition.
