There are two main reasons insiders invest in their own companies. They either believe business is about to improve, or that the company is undervalued by the market. Either way, it tells us that they expect their company’s stock to rise.
Here, we are going to highlight an insider purchase at News Corp (NWSA:US). News Corp is a media and information services company that creates and distributes content for consumers and businesses worldwide. It’s traded on the NASDAQ Stock Exchange and currently has a market capitalization of $14.1 billion.
News Corp: Insider Buying
Form 4 filings show that on 5 March, the Executive Chairman of News Corp, Rupert Murdoch, purchased 500,000 NWSA shares at a price of $24.09 per share. Following that, on 11 and 12 March, he bought another 115,904 NWSA shares at a price of $25.75 and 384,096 NWSA shares at a price of $26.14 simultaneously. These purchases cost the insider a total of $25,068,000.
First Insider Purchase for a While
Our data shows that this is the first insider purchase for a significant period of time. It is also a substantial purchase in monetary terms which suggests Murdoch is confident the share price will continue to rise.
There are unlikely to be many people who have a better understanding of News Corp than Rupert Murdoch. He founded the company over forty years ago although the present company was formed just over seven years ago when the original company was split into two.
Digital Transformation Reaping Rewards
News Corp shares have risen significantly over the last 12 months as earnings have rebounded after being severely impacted by Covid-19. Q2 revenue was still down 3% year on year at $2.41 billion but adjusted revenues increased by 2%. Second quarter total segment EBITDA was $497 million, which was a 40% increase compared to $355 million in the prior year. Net income came in at a much improved $261 million vs $103 million in the prior year. Adjusted EPS in the second quarter was $0.34 compared to $0.18 a year ago.
“The second quarter of fiscal 2021 was the most profitable quarter since the new News Corp was launched more than seven years ago, reflecting the ongoing digital transformation of the business. We reported the largest profits for Dow Jones since the acquisition of the company in 2007, with Segment EBITDA increasing 43 percent and traffic across the Dow Jones digital network surging 48 percent,” said Robert Thomson, News Corp’s CEO.
Given these strong Q2 results we see the insider buying here as bullish. The recent purchase would suggest that the Executive Chairman feels that the share price can continue to climb higher.