Insider transaction activity can give investors a more complete overview of activity within the world’s publicly-listed companies. No one knows a company’s prospects or product better than its leaders.
Here, we are going to highlight some insider purchases at Babcock International Group PLC (BAB:LN). Babcock International Group provides engineering services for the marine, land, aviation, and nuclear sectors in the UK and internationally. It’s listed on the London Stock Exchange and currently has a market capitalization of £1.1 billion.
Babcock International Group PLC: Insider Buying
Regulatory filings show that on 20 January, the CEO of Babcock International Group, David Lockwood, purchased 30,000 BAB shares at a price of £1.99 per share. On the same day, CFO David Mellors and Chair Ruth Cairnie also purchased 30,000 shares each.
This cluster buying pattern looks interesting due to the fact that all of the insiders have extensive industry experience. David Lockwood spent the last eight years as CEO at Laird and was also previously CEO at engineer Cobham. David Mellors was also previously at Cobham as CFO and before that he was CFO at QinetiQ Group. Meanwhile, Ruth Cairnie has over 37 years of experience within the engineering sector and has held the role of Non-Executive Director at Rolls-Royce Holdings PLC. This experience means that they are likely to have a good understanding of the industry and the company’s future prospects.
It’s also worth pointing out that all three insiders increased the size of their positions substantially. Lockwood’s purchase increased his position by 20%, while Mellors’ and Cairnie’s purchases increased their positions by 75% and 50% respectively. This suggests they are confident the stock will move higher.
Impacted by Covid-19
Babcock posted a disappointing Q3 update on 15 January which resulted in its share price falling 20%. The company advised that Covid-19 had led to a slowdown in most of its markets and as a result, underlying profit had fallen to £202 million for the first nine months of the year, versus £320 million a year earlier. The group also stated that it was undergoing a review of its contracts to assess their profitability and that this would most likely have a negative impact on its finances.
However, looking at the long term, the company sounded confident that it can turn things around. “While trading in the third quarter has continued to reflect the challenges of the first half and there remain a number of near-term uncertainties, the fundamental strengths of the group and the opportunities ahead give us confidence for future years,” said David Lockwood.
The insider buying here suggests that senior management view the recent drop in the shares as an attractive entry point. Given the longer-term confidence from management, we view the recent insider buying as bullish.