Insiders tend to be value investors. If they’re buying company stock, it’s usually because they believe the stock is undervalued.
In this report, we are going to highlight some interesting insider buying at Jefferies Financial Group Inc (JEF:US). Jefferies is an American investment bank and financial services company that is headquartered in New York City. Its services include capital markets and financial advisory services, institutional brokerage, securities research, and asset management. The company is listed on the New York Stock Exchange and currently has a market cap of $7.57 billion.
Large insider purchase at Jefferies Financial
Our data shows that on July 25, board member Thomas Jones bought 40,000 JEF shares at a price of $31.21 per share. This trade cost the insider $1.25 million and increased his holding to 55,962 shares.
This trade is interesting for two reasons.
Firstly, Mr. Jones has invested a considerable amount of money in Jefferies stock and boosted the size of his holding significantly. This suggests that he is very confident the stock is undervalued at present.
Secondly, Mr. Jones is a very experienced investor. Since 2005, he has served as Founder and Senior Partner of TWJ Capital LLC, an investment company. Before this, he held the position of Chairman and CEO of Global Investment Management with Citigroup Inc. This background means that he is likely to have an excellent understanding of the intrinsic value here.
On July 19, Jefferies announced a restructuring to simplify its operations.
In an effort to focus on its global investment banking business, the company will reduce the size of its merchant banking portfolio, which includes investments in real estate, oil and gas, and public companies. The plan includes spinning off its holdings in Vitesse Energy before the end of 2022 to create a new publicly-traded oil and gas company, and selling its wood and lumber products business, Idaho Timber. The company also aims to merge its investment banking arm Jefferies Group into the parent company by fiscal year-end 2022.
The market clearly liked this announcement as the stock rallied on the news.
The stock still looks very cheap today, however. Currently, analysts are expecting Jefferies to generate earnings per share of $2.97 for the year ending November 30, 2022. That puts the stock on a forward-looking P/E ratio of just 10.4 at the current share price.
In light of the restructuring news, and the low valuation, we see the insider buying here as a bullish indicator.