Insider transactions can help investors cut through the noise. Insiders are some of the most informed participants in the market meaning their buying and selling activity can provide investors with valuable trading signals.
In this report, we are going to highlight some interesting insider buying at Best Buy Co Inc (BBY:US). Best Buy is a consumer electronics retailer that operates in the US, Canada, and Mexico. Its goal is to enrich lives through technology. The company is listed on the New York Stock Exchange and currently has a market capitalization of $18.28 billion.
Best Buy Co: Insider Buying
Our data shows that on May 25, Best Buy’s Founder and ex-Chairman and CEO Richard Schulze bought 250,000 BBY shares at a price of $79.60 per share. This trade cost the insider around $20 million and increased his holding to 20.464 million shares.
This trade is worth highlighting for two main reasons. Firstly, it’s a substantial purchase. Our records show that it represents the largest purchase from an insider at Best Buy for over a decade.
Secondly, Mr. Schulze – who is likely to have an intimate understanding of the business – has been a heavy seller of BBY stock in the recent past. For example, in October 2020, he sold around $85 million worth of stock when it was trading between $115 and $120. The fact that the insider has now turned into a buyer of shares suggests that he believes the stock now offers more value than it did in the past.
After a period of strong growth during the pandemic, Best Buy is now experiencing some challenges.
Not only has top-line growth stalled due to the fact that government stimulus has been removed and consumer spending has been hit by inflation, but higher costs have impacted profits. In the quarter ended April 30, 2022, for example, non-GAAP operating income as a percentage of revenue was 4.6%, down from 6.4% a year earlier.
However, after a significant share price pullback since November, these challenges now appear to be priced into the stock. With analysts expecting earnings per share of $8.62 for the year ending January 29, 2023, Best Buy’s forward-looking P/E ratio is under 10.
The large purchase from the Founder here suggests that he sees value at that multiple. We see his $20 million buy as a bullish indicator.