Insider sales shouldn’t automatically be interpreted as bad news for a particular stock. After all, there are a number of legitimate reasons that insiders sell stock. That said, if a top-level insider is making large sales, it can pay to approach that stock with caution.
In this report, we are going to highlight a series of large insider sales at Associated British Foods PLC (ABF:LN). Associated British Foods is a diversified international food, ingredients, and retail group with operations in over 50 countries. It’s listed on the London Stock Exchange and currently has a market capitalization of £17.9 billion.
Associated British Foods: director dealing
Our records show that in December, ABF’s CEO George Weston made a number of large sales. Between 14 December and 29 December, the insider sold a total of 652,432 shares, netting proceeds of around £15 million.
Large insider sales
This selling activity is worth highlighting for a couple of reasons. Firstly, these are large sales, both in nominal and relative terms. Our data shows that these sales have reduced the size of the insider’s stake by just under 20%.Secondly, Mr Weston has considerable company experience. He was appointed to the Board in 1999 and took up his current appointment as Chief Executive in April 2005. In his former roles at ABF, he was Managing Director of Westmill Foods, Allied Bakeries and George Weston Foods Limited. This means he is likely to have a good understanding of the company and its future prospects.
Associated British Foods continues to be impacted by Covid-19. In an update on 31 December, the company advised that due to new lockdown restrictions in the UK and the Republic of Ireland, it would be temporarily closing its 253 Primark stores on 1 January 2021. These stores represent 64% of the company’s total retail selling space.
As a result of these store closures, the estimated loss of sales for the financial year is now expected to be around £650 million, up from £430 million announced on 4 December.
ABF shares have risen as much as 40% since Pfizer announced that it had developed a Covid-19 vaccine in November. It appears that Mr Weston has taken some money off the table after this share price rise to reduce his risk. Given the size of his sales, we think caution is warranted towards ABF stock right now.