If a CEO is buying company stock, it’s often worth taking a closer look. These insiders tend to be way ahead of analysts and portfolio managers when it comes to the performance of their companies, and their stock purchases can provide valuable trading signals.
In this report, we are going to highlight a large CEO purchase at Rio Tinto Group (RIO:LN). Rio Tinto is one of the world’s largest mining companies. Operating in 35 countries, it is predominantly focused on mining copper, iron ore, aluminum, and minerals. The company is listed on the London Stock Exchange and currently has a market cap of £98.3 billion.
Insider buying at Rio Tinto
Our insider transaction data shows that between July 28 and July 29, three insiders at Rio Tinto Group bought stock. Those who bought shares were:
- CEO Jakob Stausholm (10,000 shares @ £56.27 per share)
- Chairman Stephen Barton (6,600 shares @ £56.29 per share)
- Board member Ben Wyatt (100 shares @ £48.57 per share)
In total, the three insiders spent £939,071 on Rio Tinto Group stock.
Mr. Stausholm is likely to have a good understanding of Rio Tinto’s operations and financial performance. Before being appointed CEO in January 2021, he served as CFO of the company for around 2.5 years. Prior to joining Rio Tinto, he was the Chief Strategy, Finance, and Transformation Officer for the Maersk Group.
What’s interesting about this trade is that it represents Mr. Stausholm’s first open-market purchase since he joined the company in September 2018. Additionally, it has boosted the size of his holding by 29%. The nature of the trade suggests that the insider sees a lot of value in the stock right now.
Low valuation and high dividend yield
Rio Tinto’s share price has taken a significant hit recently.
Back in early June, the stock was trading above £60. Today, however, it’s near £48. Lower profitability, due to falling iron ore prices along with higher costs, have been a key driver of the share price weakness. For the first half of the year, underlying profit came in at $8.63 billion compared with $12.17 billion a year.
After the recent share price fall, the stock now looks very cheap. With analysts expecting the company to generate earnings of $9.77 for 2022, the forward-looking P/E ratio here is just 6.0. Meanwhile, the dividend yield is very high at around 11%.
The buying activity from Mr. Stausholm suggests that he sees value at this level. We view this insider activity as a bullish signal.