While the FTSE 100 index is near record highs, I’m still seeing plenty of insider buying within the UK market. This suggests that company directors – who typically buy their own stock when they believe their businesses are undervalued – continue to see value on offer.
Here, I’m going to highlight two FTSE shares with notable insider buying this month. One is a growth stock and one a dividend stock, but I think they’re both worth a closer look today.
A world-class growth company trading cheaply
First up, we have London Stock Exchange Group (LSE: LSEG), which is one of my favourite UK growth stocks (it’s my largest UK holding at present). It saw large buys from CEO David Schwimmer, CFO Michel-Alain Proch, and independent director Lloyd Pitchford between 1 August and 4 August.
Together, these insiders invested about £850k. The average price paid was a little under £94 per share.
This buying activity caught my attention for two main reasons. First, three directors have bought stock simultaneously. This pattern – known as ‘cluster buying’ – is typically quite bullish as it signals that insiders are in agreement that their stock is undervalued.
Second, there are two top-tier insiders in the mix. And top level insiders tend to know the most about their businesses.
I’m not surprised that this company is seeing some director buying at the moment. Because to my mind, it’s undervalued.
If we look ahead to next year’s earnings per share forecast, the price-to-earnings (P/E) ratio is only 22.6. For a software company that sells financial data to the world’s largest banks and asset managers, I’d expect the P/E ratio to be closer to 30.
I’ll point out that the average analyst price target here is about £12.70. That implies potential gains of 28% in the medium term.
It’s worth noting that recent earnings showed a small decrease in the growth of data subscription revenues. Further weakness here is a risk that could hit the share price.
I like the long-term story associated with data, however. And below £10, I think this stock is worth considering.
A cash cow REIT
The other FTSE stock with insider buying I want to highlight is Primary Health Properties (LSE: PHP). It’s a real estate investment trust (REIT) that focuses on healthcare property and sports a high dividend yield (about 7.5% at present).
Here, three insiders including the CEO and the Chairman bought stock between 1 August and 4 August. Several other insiders including the CFO also bought on 31 July.
Combined, the directors invested a little over £300k. The average price paid was about 96p.
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Now, I’m not an income investor. However, I do think this stock is worth considering for anyone seeking dividend income today.
Much of this company’s rental income is backed by the UK government. So, it’s far safer than a lot of other REITs.
Meanwhile, lower interest in the UK could boost profitability and the share price. So, there’s potential for attractive total returns.
It’s worth pointing out that Primary Health Properties is currently trying to buy Assura, another REIT with a focus on medical centres. This adds some risk to the investment case.
With the stock trading on a P/E ratio of 13 and sporting a massive yield, however, I like the risk-reward set-up.
