2 FTSE shares with insider buying

Insiders just spent £250k+ on these FTSE stocks, which suggests they expect them to rise. Edward Sheldon looks at whether he should buy the shares too.

| 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.

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.

One thing I always keep an eye on when looking for stocks to purchase is insider buying. Nobody has more information on a company than the people who run it. If an insider is spending a large amount of money on company shares, it’s often a sign that the outlook for the stock is attractive.

Here, I’m going to highlight two FTSE stocks that have seen large insider buys recently. Should I follow the insiders and buy these stocks for my own portfolio?

A £300k+ buy in the FTSE 100

First up, we have FTSE 100 stock London Stock Exchange Group (LSE: LSEG). Here, there was a large purchase from CEO David Schwimmer on 18 November. According to regulatory filings, the insider bought 5,000 LSEG shares at a price of £66.80 per share. This purchase cost around £334,000.

I see this buy as quite bullish. This year, LSEG shares have underperformed the FTSE 100 by a wide margin (-24% vs +10%). I’m not sure this underperformance is justified. Recent results for the third quarter of 2021 showed solid revenue growth of 7.6%. Meanwhile, the group said it’s making good progress on the integration of financial data company Refinitiv. After the recent share price pullback, the stock trades at just 22 times next year’s forecast earnings. That strikes me as quite low, given the group’s dominant market position.

It’s worth noting that Schwimmer, who has been CEO since 2018, has considerable experience in the financial services industry. Previously, he spent 20 years at Goldman Sachs in senior roles. So it’s fair to assume that he knows a bit about investing. 

Of course, there’s no guarantee the stock will rise from here. Sometimes, insiders get their timing horribly wrong when they buy shares in their own companies.

However, I’m encouraged Schwimmer’s purchase. All things considered, I’d be happy to buy LSEG shares for my own portfolio on the back of this trade.

A £250k buy in the FTSE 250

Another stock with a large insider purchase recently is FTSE 250 technology company Kainos (LSE: KNOS). Here, there was a large purchase from chairman Tom Burnet on 17 November. Regulatory filings show the insider picked up 13,865 shares at a price of £18.04 per share, increasing his holding to 28,253 shares. This trade cost around £250k.

I see this as another quite bullish buy. Kainos’ recent half-year report, posted on 15 November, showed that the company is still growing at a rapid rate. For the six months to 30 September, revenue was up 33% while software-as-a-service bookings were up 118%. However, the market didn’t like the fact that earnings growth was weak and the share price fell. That’s when Burnet stepped up to buy.

I’ll point out that even after the recent share price pullback here, Kainos still has a high valuation. Currently, its forward-looking P/E ratio is about 48. That valuation adds a bit of risk to the investment case. However, Burnet seems to be comfortable with that valuation. The fact that he dropped £250k on shares (and nearly doubled the size of his holding) suggests that he’s confident about the future and expects the stock to rise from here.

Would I buy Kainos for my own portfolio today? Yes. This is one of my favourite UK tech companies. I expect it to get much bigger in the years ahead as businesses undergo digital transformation.

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.

Edward Sheldon owns shares of London Stock Exchange Group. The Motley Fool UK has recommended Kainos. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

Why wait? I’d buy FTSE 100 shares now before the next stock market rally!

Our writer explains why he'd snap up what he sees as bargain FTSE 100 shares now rather than waiting in…

Read more »

Investing Articles

Is it time for me to change my tune about Rolls-Royce shares?

This Fool has steered clear of buying Rolls-Royce shares. But after its recent performance, he's reconsidering his stance. Here's why.

Read more »

Investing Articles

Aviva share price: 3 reasons to consider buying for 2024

The Aviva share price is still lower then when I bought some nearly a decade ago. Here's why I'm thinking…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

These 2 shares could bank me £328 a month in second income

Jon Smith runs through two FTSE stocks that have above-average dividend yields that could pay out a generous second income…

Read more »

Stack of one pound coins falling over
Investing Articles

This passive income plan is simple – but could earn me thousands!

Christopher Ruane explains how putting a fiver a day to work in the stock market might help him earn thousands…

Read more »

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

After record profits, are Lloyds shares a buy, sell, or hold?

As Lloyds pulls in pre-tax profits of £7.5bn, boosts its dividend, and continues to repurchase shares, are the company’s shares…

Read more »

Investing Articles

NatWest shares: is a once-in-a-lifetime opportunity on the way?

Should investors get ready for a unique opportunity as the UK government plans to sell off its NatWest shares later…

Read more »

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

3 charts that indicate this FTSE 100 stock is a once-in-a-decade passive income opportunity

The dividend yield on Unilever shares is at a 10-year high. And Stephen Wright also sees positive signs for the…

Read more »