Senior insiders often have access to real-time information on their companies that outsiders don’t have access to. If they’re buying their own company’s shares, it’s nearly always a positive development.
Here, we are going to highlight insider buying at Ferguson PLC (FERG:LN). Ferguson is a multinational plumbing and heating distributor that has its headquarters in the UK. The majority of the company’s earnings come from North America as Ferguson recently sold its UK business to a private investment firm. It’s traded on the London Stock Exchange and currently has a market capitalization of £23.9 billion.
Ferguson PLC: Insider Buying
Our data shows that four insiders at Ferguson have purchased stock recently.
On September 30, an Independent Director of Ferguson, Catherine Halligan, purchased 200 FERG shares at a price of $139.12 per share. This purchase cost the insider around $30,000 and increased her holding by about 50%.
On October 8, a Non-Executive Director, Kelly Baker, purchased 351 FERG shares at a price of $142.53 per share. This purchase cost the insider approximately $50,000.
Then on October 13, another Non-Executive Director, Suzanne Wood, bought 500 FERG shares at a price of $141.19 per share. This cost the insider around $70,000.
Finally, on October 14, Non-Executive Director, Brian May, purchased 750 FERG shares at a price of £103.80 per share. This cost the insider approximately £80,000.
This insider trading activity is worth highlighting for a couple of reasons.
Firstly, this cluster of buying suggests that insider sentiment at the company is positive. These are the first insider purchases since the middle of 2020 which gives the impression that sentiment has turned amongst insiders since a spree of selling towards the end of 2020.
Secondly, our research shows that all of the directors purchasing shares have considerable experience in the business world. Wood was CFO at large multinational Ashtead for six years, Halligan was Chief Marketing Officer at global giant Walmart.com, Baker has 20 years of experience at General Mills Inc, and May was at Bunzl PLC for 27 years, serving as CFO for fourteen years.
Strong Profit Growth
Ferguson’s recent results showed that the company has momentum right now.
For the full year ending July 31, Ferguson produced a pre-tax profit of $1.89 billion, which was an increase of 46.4% on 2020. The company drove profitability through market share gains and by ensuring it kept a tight control on costs. Gross margins of 30.6% were 60 basis points ahead of the year prior. A strong balance sheet of 0.6x leverage meant the company was able to announce a $1 billion share buyback and a final dividend of 166.5 cents per share.
“The Group started the new financial year with strong momentum, with organic revenue growth at similar levels to Q4 2020/21. We expect a year of good growth overall but we anticipate a tapering in the second half on tougher prior year comparatives. Given the strong momentum in the business and the agility of our business model, we are well positioned to have a year of good growth and the Board continues to look forward to the medium term with confidence,” said Kevin Murphy, Group Chief Executive.
Having seen these excellent results and optimism for the future, we see the cluster of insider buying at Ferguson as bullish. It suggests that the directors buy into the confidence their CEO has for the medium term and that they believe the market is undervaluing the company’s shares.