Insider buying can provide investors with valuable clues about a stock’s potential. Insiders sell stock for a variety of different reasons. But they only buy stock for one reason – they expect the share price is going to rise.
Here, we are going to highlight a significant insider purchase at Sinclair Broadcast Group Inc (SBGI:US). Sinclair Broadcast Group is an American television media company. The company operates in two segments, Local News and Marketing Services; and Sports. It’s listed on the NASDAQ stock exchange and currently has a market capitalization of $2.125 billion.
Sinclair Broadcast Group: insider buying
Form 4 filings show that on 20 November the Chairman of Sinclair Broadcast Group, David Smith, purchased 3.255 million SBGI shares at a price of $26.76 per share. This purchase – which cost the insider $87.1 million – boosted his holding by approximately 90%.
This purchase is worth a closer look because it is substantial in size and almost doubles Smith’s holding in Sinclair Broadcast Group. He bought the same number of shares back in March at a price 50% below current levels, so it is interesting that he is making such a large purchase after a rally in the share price.
Smith held the position of CEO at Sinclair Broadcast Group for 27 years before assuming the role of Chairman which increases the significance of this sizeable purchase. Given his experience, it is likely that Smith knows the company intimately
Strong underlying Q3 results
Sinclair Broadcast Group shares have rallied significantly over the last 4 weeks but they remain more than 10% below where they were trading 12 months ago. A $4.226 billion impairment charge relating to the local sports segments led to a consolidated operating loss of $4.178 billion in Q3. The underlying performance of the business was strong, however. Consolidated total revenue was up 37% vs Q3 2019, driven by acquisitions but also by higher political advertising revenue. CEO Chris Ripley commented that “Sinclair’s results for the quarter, excluding the impairment, exceeded our expectations and guidance.”
We see the insider buying here as bullish. The latest company news was encouraging and the large purchase of stock by the Chairman suggests he strongly believes there is value in the shares.