An insider just bought $100,000 of Magellan shares: Should you invest too?

This insider appears to believe the fund manager's shares are good value after recent weakness.

| More on:
Hand of a woman carrying a bag of money, representing the concept of saving money or earning dividends.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It can be useful for investors to keep an eye on 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, if they are buying, it suggests that they are confident in the direction the company is heading. They may even believe that their shares are undervalued at current levels.

With that in mind, let's take a look at one popular ASX 200 share that has just reported significant insider buying.

The share is question is fund manager Magellan Financial Group Ltd (ASX: MFG).

Insider loads up on Magellan shares

With the company's shares down 22% since mid to late March, it seems that one of its directors feels that this has created a buying opportunity.

According to a change of director's interest notice, the company's non-executive director, Cathy Kovacs, has snapped up her first Magellan shares since joining the fund manager in November of last year.

The release reveals that Ms. Kovacs bought 12,400 shares through an on-market trade on 30 May. She paid an average of $8.02 per share, which equates to a total consideration of just a touch under $100,000.

Should you invest?

The broker community remains divided on Magellan's shares. Though, it is worth noting that analysts appear to be seeing value emerge following recent weakness.

For example, last month analysts at Macquarie put an underperform rating on its shares. Though, its price target of $8.40 is now higher than where its shares currently trade.

Elsewhere, analysts at Morgans only have a hold rating on its shares. But with a price target of $9.67, this implies potential upside of 20% for investors over the next 12 months. In addition, Morgans is forecasting dividends per share of 63 cents in FY 2024 and then 64 cents in FY 2025. This equates to sizeable dividend yields of 7.8% and 8%, respectively.

Finally, analysts at UBS are likely to be supportive of Kovacs' decision to buy her first Magellan shares. The broker currently has a buy rating and lofty $10.25 price target on the fund manager's shares. This suggests that they could rise by over 27% from current levels.

If that were to happen, it would value the non-executive director's holding at $127,100. That certainly would be a great return on investment.

Though, as always, time will tell which brokers make the right call.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

a group of business people sit dejectedly around a table, each expressing desolation, sadness and disappointment by holding their head in their hands, casting their gazes down and looking very glum.
Financial Shares

Guess which ASX 200 stock crashed 8% on Thursday

It wasn't a happy day for this company's stock.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Financial Shares

Why QBE shares could deliver huge returns for investors that buy them today

Goldman Sachs thinks this stock could offer big returns

Read more »

A large transparent piggy bank contains many little pink piggy banks, indicating diversity in a share portfolio
Financial Shares

Considering investing in AFIC shares? Here's what you're buying

This LIC has a very diversified portfolio. What’s in it?

Read more »

A man looking at his laptop and thinking.
Financial Shares

Medibank shares dip as huge potential fines loom from 2022 data breach

The regulator has stepped in on the case.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2 and 3 on them on top of each other on a table. representing the most traded ASX 200 shares by volume today
Financial Shares

3 reasons to buy QBE shares right now

Analysts have highlighted why they think this insurance giant could deliver big returns.

Read more »

A woman with a sad face stands under a shredded umbrella in a grey thunderstorm
Financial Shares

IAG shares caught in a storm as millions join 'loyalty' lawsuit

Allegations levelled at this insurance giant could lead to a costly exercise.

Read more »

An older couple use a calculator to work out what money they have to spend.
Superannuation

AMP shares lower amid industry 'wave' of superannuation payouts to baby boomers

New APRA figures show a surge in superannuation benefits paid in lump sums and pensions.

Read more »

a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.
Financial Shares

Are AMP shares a significantly underrated buy right now?

AMP shares are unloved. Could it be a contrarian opportunity?

Read more »