There are two main reasons insiders invest in their own companies. They either believe that business performance is set to improve or that the company is undervalued. Whatever the reason for insider buying, outsiders only need to know one thing: it signals that insiders believe the share price is set to rise.
Here, we are going to highlight an insider purchase at Jardine Matheson Holdings Ltd (JM:SP). Jardine Matheson Holdings is a multinational conglomerate that has significant operations across China as well as South East Asia. It is involved in property, retail, luxury hotels, motor vehicles, construction, engineering, restaurants and transport services. It’s traded on the Singapore Exchange with its primary listing being on the London Stock Exchange and currently has a market capitalization of $20.8 billion.
Jardine Matheson Holdings: Insider Buying
Regulatory filings show that between 2 and 3 August, the CFO at Jardine Matheson Holdings, Graham Baker, purchased 20,000 JM shares at an average price of $59.38 per share. This purchase cost the insider approximately $1.2 million.
Large Insider Transaction
Our attention was drawn to this trade due to its large size. The insider has spent over $1 million on company stock which suggests he is extremely confident in the future prospects of the company.
It’s worth noting that Mr. Baker has a wealth of management experience at large publicly-listed businesses. He spent over twenty years at pharmaceutical giant AstraZeneca and worked in a series of senior roles in the UK and internationally. As well as this he has been CFO at Alvogen and most recently at Smith and Nephew.
After a very tough 2020 where the business was severely impacted by Covid-19, the results for the first half of 2021 displayed signs of recovery. Underlying profit of $615 million was up 65% on the first half of 2020 while revenue of $17.94 billion was up 10% on the same period last year. Underlying earnings per share jumped to $1.86 from $1.01 and the balance sheet remained robust.
“There was some improvement in the Group’s performance and profitability in the first half compared with the same period last year, but COVID-19 continued to have an impact in most sectors and markets. The Group has a strong balance sheet and liquidity position and will continue to focus on opportunities to create sustainable long-term growth,” said Ben Keswick, the Executive Chairman.
On the back of these reassuring results we see the recent insider trading at Jardine Matheson as bullish. It would suggest that the insider continues to believe the shares are undervalued and that the share price will continue to move upwards.