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Saga shares: Does this recent news change the investment case for me?

Saga’s (LSE: SAGA) share price has taken a beating this month after the group reported a full-year loss for FY2019, reduced its guidance for the year ahead, and slashed its dividend. Beginning April near the 110p mark, Saga shares currently change hands for under 60p.

Shortly after the 4 April full-year results, I took a closer look at what went wrong at the over-50s-focused group and gave my view on the stock. Looking at the performance figures, and considering just how much trust the company has lost among its customers, my conclusion was that if I didn’t own Saga shares, I wouldn’t buy them now and that if I did own the stock, I would give serious thought to selling it. I said that it could be a while before the group turns things around.

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However, since my last coverage of Saga shares, several new developments have come to light, which I think are worth mentioning.

Director purchases

The first new piece of news regarding Saga shares is that in recent weeks, six top-tier directors have bought shares in the company, including CEO Lance Batchelor, who recently picked up 35,000 shares (approx £20k worth) and boosted his personal holding by 18%, and Chairman Patrick O’Sullivan, who added another 30,000 shares and boosted his holding by nearly 25%.

Now, the reason this is worth mentioning is that these kinds of insiders generally have strong insights into their company’s future prospects. So, if they’re buying shares with their own money, it’s because they expect the share price to rise in the future. They wouldn’t be buying if they expected the shares to fall further, would they? As such, this insider activity could be interpreted as a bullish signal that suggests these directors believe Saga can turn things around going forward.

Broker upgrade

The next key piece of news regarding Saga is that last week, JP Morgan actually upgraded the stock from ‘underweight’ to ‘neutral,’ stating that the group has reset expectations with the latest results. This suggests the broker sees more value in the shares than it did previously.

So, do these new developments change the investment case?

I’m still steering clear

In my view? No, they don’t. A £20,000 purchase from the CEO and a £17,000 purchase from the Chairman is not enough to get me excited about the shares, to be honest. Neither is JPM’s upgrade to merely ‘neutral’.

Aside from the fact that Saga has probably lost a lot of trust recently, I think one of the major problems here – which my colleague Roland Head recently pointed out – is the group’s ‘over-50s’ target market. You see these days, 50s is still very much ‘middle aged’ and many people aged around 50 don’t want to be treated like oldies. They certainly don’t want to be ripped off when buying insurance.

So, in my opinion, Saga has a long way to go to turn things around. With that in mind, I think there are much better stocks to invest in right now.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.