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

Roland Head looks at the background to insider share sales at ASOS plc (LON:ASC), 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 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.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

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? 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. 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.

More on Investing Articles

Preparing a budget during a pandemic
Investing Articles

2 high-potential FTSE 250 stocks to buy and hold for 5 years!

The FTSE 250 is a good place to search for the next big British stocks. So, here are two companies…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Could my Stocks and Shares ISA generate £30,000 a year?

Over 2m UK citizens make some use of a Stocks and Shares ISA every year. Our writer considers if it’s…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

4 dividend stocks that can help me fight inflation!

I'm looking at dividend stocks to help my portfolio grow and overcome the impact of high inflation. Here are the…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 bargain UK shares trading at less than book value

Book value is a great way to value a stock. These UK shares are trading at a price-to-book ratio of…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

A FTSE AIM stock I’d add to my Stocks & Shares ISA in July

Henry Adefope highlights a FTSE AIM stock he believes could generate significant upside for his portfolio if he buys this…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’m following Warren Buffett and buying cheap dividend shares to build my wealth

I think this cheap dividend stock exhibits similar qualities to the companies Warren Buffett has in his investment portfolio.

Read more »

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

2 cheap FTSE 100 shares I’m buying during the dip!

Andrew Woods explains that low P/E ratios and profitable businesses attract him to these two FTSE 100 shares.

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Down 45% in a year, is now the time to buy Scottish Mortgage shares?

Jon Smith explains why Scottish Mortgage shares appear to him to be good value given their post-pandemic fall.

Read more »