There are two main reasons insiders invest in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying indicates that those within the organization expect its share price to rise.

In this report, we are going to highlight some interesting insider buying at Shell PLC (SHEL:LN). Shell is a multinational oil and gas company that is headquartered in the UK. Operating in over 70 countries globally, it is one of the largest oil and gas companies in the world. It is listed on the London Stock Exchange and the New York Stock Exchange and currently has a market cap of approximately £179.82 billion.

Insider Buying at Shell

2iQ data shows that on February 7, Shell’s Chairman Sir Andrew Mackenzie purchased 8,235 SHEL shares at a price of £24.18 per share. This trade cost the insider just under £200,000 and increased his holding to 35,858 shares.

Commodities Experience

Sir Andrew Mackenzie has considerable experience in the commodities industry. Previously he was CEO at BHP from 2013 to 2019. Here, he simplified and strengthened the business, and made BHP the first miner to pledge to tackle emissions. Earlier in this career, he spent 22 years at oil major BP where he served in several senior roles including Chief Reservoir Engineer and Chief Technology Officer. Given his experience, he is likely to have a good understanding of Shell’s prospects.

What stands out here is that the insider has increased the size of his holding from 27,623 shares to 35,858 shares – an increase of 30%. This suggests that he is very confident the stock is undervalued currently.

Record Profits

Shell has a lot of momentum right now.

Earlier this month, the oil major reported adjusted earnings of $39.9 billion for the full-year 2022. This represented its highest-ever annual profit. Its previous record for full-year adjusted earnings was $24.8 billion, which was achieved in 2008.

On the back of this performance, the company announced a $4 billion share buyback program along with a 15% dividend per share increase for the fourth quarter.

The stock remains very cheap, however. With analysts forecasting earnings per share of $4.93 for 2023, Shell’s forward-looking P/E ratio is just 6.3 at present. That’s well below the market average.

The recent share purchase from the Chairman suggests that he sees value in the stock right now. We view the insider transaction activity as a bullish signal.

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