Top-level insiders such as CEOs and Chairmen tend to have a good understanding of their companies’ operating activities. If they’re buying company stock, it’s often a sign that the outlook for the business, and the share price, is attractive.
In this report, we are going to highlight a large purchase from a top-level insider at Persimmon PLC (PSN:LN). Persimmon is a UK-based housebuilder. Founded in 1972, it is one of the largest housebuilding companies in Britain, with over 30 regional offices. It is listed on the London Stock Exchange and currently has a market cap of £4.34 billion.
Insider buying at Persimmon
Our data shows that on 6 October, Persimmon Chairman Roger Devlin picked up 20,000 PSN shares at a price of £12.64 per share. This trade cost the insider approximately £253,000 and increased his holding to 32,575 shares.
This trade is notable for several reasons. Firstly, Mr. Devlin doesn’t purchase stock very often. This purchase represents his first purchase since October 2018.
Secondly, Mr. Devlin has increased the size of his holding by around 160% with this trade. This indicates that the Chairman sees a lot of value in the stock at present.
Hit by rising interest rates
Persimmon shares have experienced significant weakness lately. Six months ago, they were trading near £22. Today, however, they’re trading near £12. Rising interest rates in the UK have been the major driver of the weakness as higher rates make houses less affordable.
While the short-term outlook here doesn’t look great, the outlook in the medium to long term is not so bad. In the UK, there is a major housing shortage, and the government wants 300,000 new homes built every year to match demand.
It’s worth noting that in Persimmon’s recent H1 update, it advised that demand remains strong and that it had made a robust start to the second half of the year. As a result of the stable level of demand, it reiterated its guidance for 14,500-15,000 completions for the full year. It noted that sales price inflation is offsetting cost inflation.
In light of the recent H1 update, we see the insider buying here as a bullish indicator.