A top-level company insider knows the inner workings of their business better than any analyst or outside investor does. If these insiders are buying company stock it is a positive development and sends a bullish signal out to potential investors in the company.
Here, we are going to highlight an insider purchase at Bellway PLC (BWY:LN). Bellway is a UK house builder that is based in Newcastle upon Tyne. It specializes in residential homes and property throughout the UK, employing over 3,000 people. It’s traded on the London Stock Exchange and currently has a market capitalization of £3.97 billion.
Bellway PLC: Insider Buying
Our data shows that on October 25, the Chairman of the Board at Bellway, Paul Smith, purchased 3,154 BWY shares at a price of £31.55 per share. This purchase cost the insider approximately £100,000 and increased his holding by around 15%.
Strong Trading History
This trade is worth highlighting due to the fact that Smith has a high trading IQ of 117 and our historical data shows that he has demonstrated an impressive ability to pick his trading levels well. He picked up sizeable amounts of stock in 2020 at levels between 20% and 30% lower than where the company’s stock is currently trading.
It's worth noting that Mr. Smith has significant company and industry experience. He has served on the board at Bellway since 2013 and as Chairman since the end of 2018. Previously, he was Group Finance Director at fellow house builder Travis Perkins PLC for 17 years. Smith was also a Non-Executive Director of Redrow PLC. Additionally, he has experience outside of the industry, having served as Senior Independent Non-Executive Director at Clipper Logistics PLC and as a Non-Executive Director at Pendragon PLC. This experience means he is likely to have a good understanding of his firm’s prospects.
Record Order Book
Bellway recently posted impressive full-year numbers, helped by favorable market conditions and strong demand for homes throughout the UK.
For the year to July 31, 2021, revenue was up 40.3% to £3.1 billion. This led to gross profit of £651.9 million which was up 54.4% on the year before. The underlying gross margin of 20.9% was also higher than the 2020 figure of 19%. Profit before tax jumped over 100% to £470 million.
On the liquidity front, the company had cash of £330.3 million at the end of the year versus £1.4 million the year prior.
“The Group is recovering well from the pandemic and looking ahead, Bellway is in a robust position, with a motivated and dedicated workforce. It benefits from a strong, ungeared balance sheet, a record order book, and a strengthened land bank. Our focus on quality, our responsible approach to business and our capacity to expand, lay the foundations for long-term, sustainable volume growth. I am therefore confident that our three strategic priorities of volume growth, value creation for shareholders, and our 'Better with Bellway' approach to sustainability, will continue to ensure the ongoing and long-term success of Bellway and its stakeholders,” said Mr. Smith.
The strong results coupled with the very positive outlook statement lead us to see the recent insider buying at Bellway as bullish. It suggests that the Chairman believes the shares are trading at a discount to their full value.