Should you follow director selling at ASOS plc, Moneysupermarket.com Group plc and Accesso Technology Group plc?

Roland Head looks at the background to insider share sales at ASOS plc (LON:ASC), Moneysupermarket.com Group plc (LON:MONY) and Accesso Technology Group plc (LON:ACSO).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When founder shareholders in a company sell a major slice of their shareholding, should you sell too? The answer isn’t always obvious, as there can be good reasons for a sale.

However, three of the most successful technology stocks of recent years have recently reported major share sales by founding directors. In this article I’ll ask what this means for each company, and whether you should consider following the inside money and selling up.

Too soon to sell?

This week brought news that Nick Robertson, a founder and non-executive director of online fashion retailer ASOS (LSE: ASC), has sold a 1.6% stake in the firm.

Mr Robertson’s share sale netted him a cool £46m, but he may not have sold voluntarily. It seems that Mr Robertson has recently got divorced. Divorce is a relatively common reason for major director share sales and given that he still has a 6.59% stake in ASOS, I’m not too concerned.

Growth remains strong, with earnings expected to rise by about 30% in both 2016 and 2017. Although I’ve been critical of ASOS’s low profit margins in the past, the firm does seem to be maturing well and generates a lot of free cash flow.

ASOS shares aren’t cheap on 63 times 2016 forecast earnings, but I’d probably continue to hold for the time being.

This one might be a sell

I’m less convinced about the investment case at queuing solutions firm Accesso Technology Group (LSE: ACSO), whose share price has risen by almost 700% over the last five years. In April, four of the group’s founding shareholders sold £17.4m of stock in a placing to institutional investors.

Accesso’s chairman, chief executive, finance director and a founding shareholder collectively sold almost 2m shares — equivalent to around 8.9% of the company. The placing represented roughly 45% of their collective shareholding, so it was a significant sale for them.

This suggests to me that Accesso’s best-informed insiders believe the company’s growth rate may start to slow as the business matures.

Accesso pays no dividend and trades on 34 times 2017 forecast earnings. Amazingly, the share price has risen by about 30% since the directors sold their shares. If I was a shareholder, I’d be tempted to sell at least half of my holding.

A potential income play?

Moneysupermarket.com Group (LSE: MONY) founder Simon Nixon has been scaling back his holding in the £1.8bn company for some time. Mr Nixon’s most recent sale was in March, when he sold his remaining 6.9% stake. The sale netted Mr Nixon a cool £124m, but I don’t think it’s a sell signal for the rest of us.

Moneysupermarket.com has established itself as a major consumer brand, with high profit margins and strong cash generation. The medium-term outlook seems stable and broker earnings forecasts have been rising steadily.

The latest forecasts put the stock on a 2016 forecast P/E of 21, falling to a P/E of 19 in 2017. This doesn’t seem excessive and the 3% forecast dividend yield should be amply covered by free cash flow.

I think Moneysupermarket is starting to make sense as an income stock, and would be happy to continue holding the shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Moneysupermarket.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »