Insider Buying

An Insider at Associated British Foods PLC (ABF: LN) Just Dropped £736,000 on Stock

Associated British Foods PLC
(ABF:LN)
12 months:
-33%
Activity:
Bullish
Pattern:
Purchase from Non-Executive Director
News:
Trading update
Associated British Foods PLC
(ABF:LN)
12 months:
-33%
Activity:
Bullish
Pattern:
Purchase from Non-Executive Director
News:
Trading update

Insider buying can provide clues about a stock’s next move. Insiders sell company stock for a number of reasons. Yet they only buy stock for one reason – they expect it to rise.

In this report, we are going to highlight a large insider purchase at Associated British Foods PLC (ABF:LN). Associated British Foods is a diversified international food, ingredients, and retail group with operations in over 50 countries. It’s listed on the London Stock Exchange and currently has a market capitalization of £12.28 billion.

Insider Buying at Associated British Foods

Our insider transaction data shows on June 29, a Non-Executive Director at Associated British Foods, Emma Adamo, purchased 45,000 ABF shares at a price of £16.36 per share. This trade cost the insider around £736,000 (approx. $875,000) and increased her holding in the company by about 10%.

Following this, on July 5, Independent Director - Wolfhart Gunnar Hauser bought 3,243 shares at a rate of £15.34 per share. In total, this trade was worth around £49,746 (approx. $59,000).

Substantial Purchase

This insider activity at Associated British Foods is worth highlighting for a couple of reasons.

Firstly, the insider has spent a large amount of money and increased her stake by 10%. This suggests that she is very confident in the prospects of the company. This trade represents the largest buy from an insider at ABF since 2014.

Secondly, the Non-Executive Director has been at the company for ten years so is likely to know the business well. Interestingly, she sold a large amount of stock at much higher levels in January. The fact that she is now buying indicates that she now feels they are undervalued at these lower levels.

Low Valuation

Associated British Foods shares have experienced a substantial pullback recently and now trade at quite a low valuation. Analysts expect the group to generate earnings per share of 128p this financial year, which puts the stock on a forward-looking P/E ratio of just 12. At that multiple, there could be some value on offer here.

It’s worth noting that in a recent trading update for the 36 weeks to May 28, ABF advised that it is on track to meet market expectations for the year. In the third quarter, the group saw revenue grow 32% year on year, while sales in the food business increased by 10%. The company was able to raise prices to address cost input inflation and it expects sugar sales prices to remain strong, which will continue to benefit the sugar division.

“Sales and adjusted operating profit in the period were in line with our expectations. Our full-year outlook remains unchanged with significant progress expected in adjusted operating profit and adjusted earnings per share for the group,” said management.

In light of the low valuation here, and the solid update, we see the large insider purchase as a bullish indicator.

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