MENU

Should You Follow Director Buying At BP plc, South32 Ltd And Audioboom Group PLC?

Many companies with a 30 December year end have now released their first-half results. Directors, who were unable to buy or sell shares during the “close period” ahead of the results, have become free to trade again.

There hasn’t been a huge amount of director dealing overall, but there has been substantial buying at most of the heavyweight companies in the unloved resources sector, as well as one or two notable deals in the technology space.

Recent hefty purchases at oil supermajor BP (LSE: BP), miner South32 (LSE: S32) and small-cap tech firm Audioboom (LSE: BOOM) are the latest trades to catch my eye.

BP

Directors at BP’s rival Shell were not slow to avail themselves of the opportunity to buy shares after the company released its half-year results at the end of July — trades I highlighted for readers this time last month. There’s been further director buying at Shell since, but now it seems that some directors at BP also see value in their company at current depressed levels.

In particular, BP chairman Carl-Henric Svanberg has nailed his colours to the mast by purchasing a cool one million shares on Monday. Mr Svanberg’s total investment was £3.43m, having paid 343p a share.

You can buy BP today at around the same price, on a current-year forecast price-to-earnings (P/E) ratio of 14.5, falling to around 12 for 2016. A whopping 7.7% dividend yield may, or may not, be sustainable, but, either way, BP appears a good buy at the current level for far-sighted investors.

South32

South32 was demerged from mining giant BHP Billiton earlier this year. I recently highlighted director buying at BHP Billiton, and fellow FTSE 100 heavyweights Rio Tinto and Glencore, but South32’s directors have been as keen to open their wallets as their counterparts at the larger companies.

We’ve seen the following purchases, since the company released its maiden results on 24 August.

Director Date of purchase No. of shares Price per share Total investment
Frank Cooper (non-exec) 2 September 122,866 AU $1.464968 AU $179,995
Keith Rumble (non-exec) 1 September 50,000 69.5p £34,750
David Crawford (chairman) 27 August 331,500 AU $1.493325 AU $495,037

The shares have moved up a bit in recent days — to about 75p, as I write — but with a forward P/E of not much more than 10, and a 3% dividend yield, they still look reasonably cheap.

However, while the directors are clearly in bullish mood, South32 is unproven as a standalone company, and, with great value also on offer from the big established businesses in the sector, I find it hard to get too excited about the Billiton spin-off at this stage.

Audioboom

Nick Candy was appointed a non-executive director of Audioboom in April this year. Mr Candy is co-founder and chief executive of a top luxury real estate designer (projects include One Hyde Park in London) and is not short of a bob or two.

Nevertheless, a £480,000 investment in Audioboom last week by Candy Ventures is hardly small change. The 16,000,000 share purchase at 3p a pop takes Mr Candy’s beneficial interest in Audioboom to 40,820,000 shares (7.62% of the company). The shares have since risen to 5p, giving the company a market value of £27m.

Audioboom is a digital audio platform focused on the spoken word, and the company is aiming to create “the world’s first aggregated audio content syndication and advertising network”. The business is currently loss-making — and will continue to be for the foreseeable future — and is impossible to value on any conventional financial metrics. However, investors who like the odd “blue-sky” punt might want to dig deeper into the company’s potential, following Mr Candy’s latest show of faith.

Of course, not all smaller companies are as speculative as Audioboom. Indeed, Mark Rogers, the Motley Fool's shrewd small-cap expert, has just unearthed a profitable company he believes has outstanding business prospects and super upside potential.

For a limited time only, you can read Mark's exclusive research for FREE and with no obligation in his in-depth report -- "1 Small-Cap Stock Flying 'Under The Radar'".

To read this free report while it's still available -- simply click here now!

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.