Insider buying can provide powerful investment insights. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.
In this report, we are going to highlight recent insider buying activity at BP PLC (BP/:LN). BP is one of the world’s largest energy companies. Traditionally, it was focused on oil and gas, however, in recent years, it has made major moves in the renewables space. It is listed on the London Stock Exchange and the New York Stock Exchange and currently has a market cap of £97.12 billion.
Insider buying at BP
Our data shows that in August, two insiders at BP purchased company stock. On August 2, board member Tushar Morzaria picked up 20,000 ordinary shares at a price of £4.06 per share. Then, on August 28, board member Karen Richardson bought 3,095 American Depositary Shares (ADSs) at a price of $32.31 per share. Both insiders invested around $200,000 in stock.
This insider activity is worth flagging due to the fact that both of these insiders have investment experience. Mr. Morzaria previously held various senior roles at JP Morgan, including the CFO of its Corporate & Investment Bank. Meanwhile, Ms. Richardson is currently Partner at Artius Capital Partners, which invests in, and partners with, small companies.
Additionally, both insiders have increased the size of their holdings substantially here. Mr. Morzaria has upped his stake by 25% while Ms. Richardson has increased the size of her position by 173%. This suggests that the insiders are very confident the stock is set to move higher.
Benefitting from high oil prices
BP’s recent Q2 results showed that the company has a lot of momentum at present.
For the quarter, the energy giant generated an underlying replacement cost profit of $8.5 billion (its highest profit in 14 years) versus $2.80 billion a year earlier. Meanwhile, operating cash flow for the period amounted to $10.9 billion, up from $5.4 billion a year earlier.
Thanks to this strong performance, the company was able to pay down debt significantly, ending the period with net debt of $22.8 billion versus $32.7 billion a year earlier.
It also raised its dividend by 10% and increased its share buyback program for Q3 to $3.5 billion.
In light of these strong results, we see the insider buying here as a bullish indicator.