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.

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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.

Here, I’m going to highlight two FTSE 100 stocks that have seen large insider buys in the last few weeks. Should I buy these shares for my portfolio on the back of this activity?

FTSE 100 insider buying

First up, we have alcoholic drinks giant Diageo (LSE: DGE). Here, there was a large purchase from chairman Javier Ferrán on 23 September. He purchased 25,000 shares at a price of £35.25 per share, spending a total of £881,250 on DGE stock.

In hindsight, this purchase was timed well because only a week after the trade, Diageo posted an encouraging trading update which noted it had made a “strong start to fiscal 22.” The company said its North American business was performing strongly and that it expects its organic operating margin to benefit from a further recovery in sales volumes.

Would I buy Diageo shares for my portfolio today? Yes, I would. In my view, Diageo is a high-quality business and I expect it to do well as the world reopens in the years ahead.

It’s worth noting that Diageo does trade at a higher valuation. Currently, the FTSE 100 stock has a forward-looking price-to-earnings (P/E) ratio of about 27. This adds some risk to the investment case.

However, I’m comfortable with the valuation. Since the company’s latest trading update, analysts at Credit Suisse have raised their target price from £39.50 to £42.00, which implies upside of nearly 20%.

Insiders spent millions here

Another FTSE 100 stock that’s seen some big buying recently is private equity and infrastructure investment group 3i (LSE: III). On 20 September, Peter Wirtz, co-head of Private Equity, purchased 75,000 shares at a price of £12.69 per share, spending £951,615 on stock. Meanwhile, between 27-29 September, Pieter de Jong, co-head of Private Equity, purchased 100,000 shares at an average price of £12.77 per share, spending £1,277,000 on stock.

This insider activity’s very interesting, in my view. Both Wirtz and de Jong are expert investors. The fact they’ve spent such large sums on stock suggests they’re pretty confident the share price is set to rise.

It’s worth noting that, recently, 3i released a trading update in which it said its investment portfolios have continued to make good progress this financial year. It noted it’s seen a “strong performance” in the significant majority of its investments.

Would I buy this FTSE 100 stock for my portfolio today? Looking at the business, I’d be comfortable taking a small position here. I expect the private equity and infrastructure markets to do well in the years ahead and I think 3i looks well-placed to benefit. The valuation is very undemanding (forward P/E of just 5.2) so I think there’s upside potential.

One risk to consider here is volatility. 3i’s revenues and profits can flux and this is reflected in the share price, which can also be turbulent at times.

I think the overall risk/reward skew here is attractive however.

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Edward Sheldon owns shares of Diageo. The Motley Fool UK has recommended Diageo. 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.

Recently, I’ve noticed some large insider buys at a FTSE 100 company. I see this director dealing as very encouraging. On the back of this insider activity, I’ve bought more shares in the company myself.

FTSE 100 director dealing

The FTSE 100 company I’m referring to is consumer goods champion Reckitt Benckiser (LSE: RB). It owns Dettol, Nurofen, Durex, and a host of other well-known brands.

This week, the company has announced two large director deals. On 20 November, Chairman Chris Sinclair purchased 3,700 shares, spending £248,600 on the stock. Then, on 25 November, CEO Laxman Narasimhan purchased 7,930 shares, spending £501,900.

Insiders appear to be confident

This director dealing looks bullish to me for a number of reasons.

Firstly, these are top-level insiders who have bought stock. They are likely to have an in-depth understanding of Reckitt’s recent performance. It’s fair to assume that they are going to be way ahead of analysts and fund managers.

Secondly, these are large purchases. Both insiders have increased their stakes in the company significantly. Narasimhan’s purchase of 7,930 shares, for example, has increased the size of his holding by 23%. Meanwhile, Sinclair’s purchase of 3,700 shares has increased his stake by 60%. This suggests that these insiders firmly believe the FTSE 100 stock is undervalued right now.

Finally, insiders at Reckitt Benckiser have timed their purchases well in the past. Back in March, a number of top-level insiders, including the CEO, purchased RB stock when it dropped below £60. In the next few months, the share price rose to around £80 on the back of strong results.

I’m bullish on Reckitt Benckiser

This director dealing is not the only thing I like about RB right now. There are other reasons I’m bullish on the FTSE 100 stock. 

One is that the company is benefiting from the increased focus on hygiene as a result of Covid-19. This is reflected in recent results, which have been excellent. Third-quarter results, for example, showed like-for-like sales growth of 13.3%. I expect hygiene to remain a focus across the world for years to come.

Secondly, City analysts are currently upgrading their earnings forecasts. Over the last month, the consensus earnings per share forecast for this year has risen from 318.8p to 325.2p. This is a positive development and it should support the share price.

I’ve bought more shares in this FTSE 100 firm

After rising to £80 in late July, Reckitt shares have pulled back to near £65 recently. Since the vaccine news, investors have dumped the stock.

I see a lot of value here after this pullback (and clearly so do the CEO and the Chairman). Earlier in the week, after the Chairman’s purchase, I topped up my holding.

With the forward-looking P/E ratio currently around 20, and a yield of about 2.7% on offer, I see this recession-proof FTSE 100 stock as a strong buy.

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Edward Sheldon owns shares in Reckitt Benckiser. 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.

Quite often, insiders time their trades very well. For example, back in early March, I noted insiders at Reckitt Benckiser were buying heavily around the 5,500p-6,000p level. Since then, the FTSE 100 stock has climbed up to around 7,500p on the back of strong results.

Today, I’ll highlight two FTSE 350 shares that have recently seen some insider buying. Are these stocks worth buying on the back of this insider transaction activity?

Bullish insider buying at this FTSE 100 company

One FTSE 100 stock that’s seen some insider buying recently is defence giant BAE Systems (LSE: BA). According to regulatory filings, on 31 July, Lady Stephanie Carr – the wife of BAE chairman Sir Roger Carr – purchased 40,546 BAE shares at a price of 493p. The total cost of the purchase was approximately £200,000.

In my view, this insider purchase looks quite interesting. For a start, the chairman’s likely to have a very good understanding of the business and its prospects. Secondly, this was their largest insider purchase in a number of years (and the first since 2017).

In addition, the insider purchase came after the FTSE 100 company issued a relatively encouraging set of half-year results in which it declared a dividend and said that it expects a “good second half to the year.”

All things considered, I see this insider purchase as a bullish signal. With the stock trading on a low P/E ratio of just 12, I see it as a ‘buy’.

easyJet shares: a substantial insider purchase 

Turning to the FTSE 250, there has also been some interesting insider buying at budget airline easyJet (LSE: EZJ) recently. According to regulatory filings, on 4 August, deputy chairman Charles Gurassa bought 90,241 easyJet shares at a price of 554p per share. The total cost of the trade was £499,935.

This trade stands out to me for several reasons. Firstly, at just under half a million pounds, it’s a substantial trade. And this purchase has boosted Gurassa’s holding significantly. Before this buy, he owned 18,198 easyJet shares. Now, he owns 108,439 shares. This suggests he’s confident the share price is going to rise.

Secondly, Gurassa has plenty of industry experience. Not only has he served as easyJet’s deputy chairman since 2011, but he has also served as CEO of Thomson Travel Group, executive chairman of TUI Northern Europe, and director of Passenger and Cargo at British Airways. It’s likely he knows the airline industry well.

Given the size of this trade and Gurassa’s experience, I think this insider purchase is quite bullish. That said, given the enormous amount of uncertainty associated with Covid-19, I wouldn’t rush to buy easyJet shares right now. Given the challenges the airlines face in the near term, I think there are better stocks to buy at present.

The post Director dealings: insiders have been buying these FTSE shares. Should you buy too? appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Reckitt Benckiser and BAE Systems. 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.

In spite of last week’s profit warning which sent shares in the company plunging more than 20%, Chief Executive Lance Batchelor was among the buyers, with purchases of more than 72,000 shares for a total consideration of nearly £100,000 since 6 December.

CFO Jonathan Hill was another significant buyer after purchasing 17,400 shares at 132.6p on 11 December, for a total transaction amount of more than £23,000.

Sign of confidence

Directors sometimes buy after a significant drop in the share price of their company, demonstrating that they believe the stock has been oversold. And when they do so, this is usually seen as a sign of confidence in the company’s prospects.

Some investors take this as a buying signal, especially if the director in question is in a position of knowledge and exercises significant day-to-day management over the company. This seems to be the case, with the CEO and CFO of course being among the very top positions within the company’s management structure.

Historical evidence shows that whenever directors acquire significant quantities of shares in the companies they manage, the stock often outperforms the market in the months to come. This would suggest that an investment strategy which follows the pattern of director dealings has the potential to produce market-beating returns.

More pain ahead?

Nonetheless, I’m cautious about buying the shares myself as I believe there could be more pain ahead for shareholders. With the ongoing shift from insurance underwriting to insurance broking and increasing customer acquisition costs, Saga’s profits could have a lot further to fall before eventually making a recovery.

And although valuations are undemanding, with the shares trading at 9.5 times expected earnings this year, the operating environment remains a challenge. This means a re-rating in its shares beyond 11 times forward earnings over the next 12 months appears unlikely to me.

Selling activity

Meanwhile, there was also noticeable selling activity with housebuilder Berkeley Group (LSE: BKG) recently.

Karen Ellis, wife of executive director Sean Ellis, sold 65,000 shares, worth nearly £2.7m, on 11 December. Sean Ellis is currently the Chairman of St James Group and the Berkeley Homes Eastern Counties Division, and has been a Divisional Executive Director since 9 September 2010.

This follows on from other major share disposals earlier this year, which included sales from Chief Executive Robert Perrins’ wife and veteran chairman and co-founder Tony Pidgley, who sold 500,000 and 750,000 shares, respectively, in September.

The market doesn’t take too kindly to major players wanting to sell, but ultimately it’s the fundamentals that determine the stock in long term. At odds with the signal from recent share dealings, management recently lifted its five year pre-tax profit guidance from 2016 to 2021 to £3.3bn, up from £3bn previously.

However, when we look further ahead, there are also reasons to be less sanguine. Berkeley is seeing a significant reduction in reservation rates, especially in the capital, reflecting weaker demand amid Brexit uncertainty. Although this has so far not had a discernible impact on average selling prices for the group, Berkeley cannot be immune to market conditions forever.

The post Directors at Saga plc keep buying — should you join them? appeared first on The Motley Fool UK.

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Jack Tang 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.

Big Purchases

In less than three weeks since the shock profit warning, seven directors (or their closely-related parties) have bought nearly 200,000 shares, worth almost £600,000. Non-executive director Anthony Ball and Kay Rose, wife of non-exec Nick Rose, were the biggest buyers and purchased 70,000 and 75,000 shares respectively, at a cost of 302p per share on 30 January. Chairman Michael Rake’s wife Caroline and HR director Alison Wilcox were also noticeable buyers.

It’s important to realise that these are very sizeable sums — for comparison, director purchases (outside of dividend reinvestment plans) amounted to just over £20,000 during the six months before the 24 January announcement. And that’s before we mention the sell trades during that period, some of which were very large.

Luis Alvarez, CEO of BT’s Global Services division, which oversees BT Italia, sold 190,000 shares on 2 December 2016. That represents a sale of more than a third of his total shareholding at the time, which netted him £674,500. The timing of the trade seems noteworthy in light of BT Italia’s problems, however there’s no suggestion of insider trading.

Sign of confidence

It’s always nice to see managers showing faith in their companies, but there may be more to it than that. There’s a lot of research out there which shows that whenever executives buy significant quantities of shares in their own companies, the stock often outperforms the market in the coming months. This would suggest that excess returns can be earned by following the pattern of director trades.

The rationale for following director trading is simple. The theory is that directors tend to have a better understanding of the day-to-day running of their company and can sometimes be privy to inside information. These information asymmetries can help directors to better time the market, which may give them an edge over ordinary shareholders.

Directors often buy after a significant drop in the share price of their company, and when they do so, this is usually seen as a sign of confidence in the company’s prospects. That said, directors are only people, and being like the rest of us, they can mistakes from time to time.

Should you join in?

There’s a lot of differing opinion on BT’s shares. Some are optimistic about the company’s cost-cutting potential following its acquisition of EE, the UK’s biggest mobile network operator. It’s for this reason that Barclays reiterated its “Overweight” rating on BT on 30 January.

I’ll also add that BT is generating robust cash flows despite recent setbacks, and this has enabled the company to promise dividend growth of at least 10% over the next two years.

Others are less sanguine though. Analyst Saeed Baradar of city broker Louis Capital is concerned about the prospect of a football rights bidding war and the impact this could have on its dividend sustainability. On top of this, BT has one of the most underfunded pension schemes in the world, and the deficit may still have further to rise as inflation expectations grow in the UK.

The post Directors at BT Group plc keep buying — should you join them? appeared first on The Motley Fool UK.

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Jack Tang 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.

But while directors’ dealings can be a useful indicator of when to buy and sell shares, that’s not always the case. Directors may benefit from an information advantage, but they can also suffer from confirmation biases and end up making bad investment decisions. After all, they’re only human and they make mistakes just like the rest of us.

Below, I’ll take a look at whether investors should follow directors into buying Laird (LSE: LRD) and Barratt Developments (LSE: BDEV).

Profit warning

Laird’s shares have lost more than half of their value since the start of the year, as the wireless technology company warned of very challenging trading conditions in its Performance Materials division. Because of delays in the smartphone cycle and uncertainty in demand from mobile device manufacturers, the company lowered its expectations for full-year underlying pre-tax profits to around £50m, down from £73 million last year.

A turnaround won’t be quick or easy, but Laird’s chief executive and the chief financial officer seem confident given their latest share purchases. CEO Anthony Quinlan and CFO Kevin Dangerfield took advantage of the latest profit warning to purchase 20,000 and 10,000 shares, respectively.

It’s difficult to tell whether these two directors are trying to shore up confidence in the company’s shares or genuinely believe its shares are undervalued. Personally, I think the stock does offer real value and reasonable turnaround prospects. Laird is currently trading at 11.2 times its much reduced 2016 expected earnings, which gives investors a wide margin of safety and plenty of potential upside if a turnaround does indeed materialise.

Right now, the stock is even cheaper than in the immediate aftermath of the profit warning, with shares in the company trading at 155.4p, around 8-9% less than the price the directors paid.

Brexit hit

Directors in Barratt Developments seem to be optimistic about their company too. On 21 October, chairman John Allan purchased 20,000 shares, while non-executive director Richard Akers bought 10,000 shares.

The housebuilder, like most of its sector peers, was badly hit by the Brexit vote on 23 June, and shares in the company remain well below their pre-Brexit peak of more than 673p in September 2015. Despite this, city analysts are relatively sanguine about the earnings and dividend prospects of the company. After a 22% rise in underlying profits in its 2016 financial year, they expect the company to report a mere 4% decline in earnings this year, with forecasts of a 7% recovery for the following year.

These forecasts imply shares in Barratt trade on a forward P/E of 9.0, with valuations falling to just 8.4 times on its forecast 2018 earnings. Moreover, given robust cash flow generation and a robust balance sheet, because of resilient residential property prices in the UK, shares in Barratt have a prospective dividend yield of 7.4% for 2017 and 2018.

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Such questions haven’t troubled directors at Barclays (LSE: BARC), RSA Insurance (LSE: RSA) and Howden Joinery (LSE: HWDN), who have loaded up on shares in their own companies in recent days. Should you follow their lead, and back these three firms today?

Terrific value

Barclays’ shares have lost more than a quarter of their value since new chief executive Jes Staley took up the reins on 1 December.

Yesterday, the company notified the market that Mr Staley bought 144,000 American Depository Shares (ADSs) at $9.95 a pop on Wednesday. Each ADS represents four ordinary shares, so we’re effectively looking at a 576,000 share purchase at around 170p for a total outlay of not much shy of a cool one million quid.

I have to say, the shares do look terrific value at this level, being at a 40% discount to net tangible asset value, and on a cheap earnings rating to boot. Mr Staley evidently reckons they’re a steal, because he was previously happy to invest £6.5m at 233p ahead of taking up his post.

Turnaround on track

Chief executive Stephen Hester wasted no time opening his wallet after releasing RSA Insurance’s Q1 results two weeks ago. He immediately snapped up 100,000 shares at 479.85p a time for a total outlay of £479,850. And he was followed last week by new non-executive director Martin Strobel with a £57,924 maiden purchase of 12,000 shares at 482.7p.

Mr Hester arrived at RSA in 2014 after serious irregularities in the insurer’s Irish division were unearthed. Restructuring the group and rebuilding the balance sheet hasn’t been a speedy process, but the recent Q1 results suggest the turnaround is firmly on track.

Analysts are expecting a big uplift in earnings this year, putting the company on a P/E of 15, which falls near to 12 next year on further strong forecast growth. A well-covered dividend yielding 3%, rising to 4% next year, is also on the cards, so the shares appear to offer reasonable value.

Particularly undervalued?

Three directors of Howden Joinery have bought shares this week. Richard Pennycook, who has been a non-executive director of the FTSE 250 firm since September 2013, massively upped his holding from 3,000 shares to 54,663 shares, splashing out £250,000 at 483.9p a share.

However, Mr Pennycook has just been elevated to the chairman’s role, so I’m not entirely convinced his purchase is that significant. Meanwhile, maiden buys of 3,000 shares by two other non-execs might be described as ISA-sized.

Trading on a current-year forecast P/E of above 16, with a modest dividend yield of 2.3%, and solid but unexceptional growth forecasts, I’m not sure Howden leaps out as an obviously undervalued stock.

The post Should you follow directors buying shares at Barclays plc, RSA Insurance Group plc & Howden Joinery Group plc? appeared first on The Motley Fool UK.

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

Morrisons

As expected, annual results from Morrisons on 10 March weren’t great. The UK’s no. 3 supermarket posted a 4% drop in turnover for the year, while underlying earnings fell 28%.

However, there were signs that the turnaround strategy of chief executive David Potts is starting to gain traction. Morrisons said it had achieved its initial aims to begin stabilising like-for-like sales, lowering costs and recruiting new talent. Free cash flow was also ahead of initial expectations, and a big chunk was taken out of net debt.

Coming on top of news a couple of weeks earlier that Morrisons has inked a deal to supply food to Amazon‘s Prime Now and Pantry customers, the company’s prospects are looking more promising than they have for some time.

Mr Potts certainly seems to think so. On Wednesday this week, he splashed out £362,916 on 180,000 shares, paying 201.62p a share. You can buy at a slightly lower price today, and may want to consider doing so, with analysts forecasting a 36% uplift in earnings this year to give an attractive price-to-earnings growth (PEG) ratio of 0.5.

Imperial Brands

Tobacco group Imperial Brands has been enjoying rather better momentum in its business than Morrisons in recent years, and the company said in a trading update in February that it is well placed to meet expectations for its current financial year ending September 2016.

At the same time as David Potts was buying his Morrisons shares on Wednesday, Imperial non-executive director Steven Stanbrook was making his maiden purchase at the tobacco company.

Mr Stanbrook bought 5,000 American Depositary Shares (ADSs) at a bit over $111 a pop, and followed up with a further 3,986 at a similar price, yesterday. One Imperial ADS is equivalent to two ordinary shares, so we’re effectively looking at a 17,972 share purchase at around 3,860p for a total outlay of not much shy of £700,000.

Imperial’s shares are trading nearer 3,800p, as I’m writing, and are on a reasonable forward price-to-earnings (P/E) ratio of 16, with a decent yield of 4.1%, so following Mr Stanbrook’s lead could be a good move.

Hikma Pharmaceuticals

Shares of Hikma Pharmaceuticals have been moving higher since the company released its annual results on 16 March. But the rising price hasn’t put directors off buying.

Non-executive Robert Pickering picked up 2,500 shares at 1,856p a time (total investment, £46,400) on 21 March, followed by a second non-exec, Patrick Butler, who also bagged 2,500 shares, but paid 1,920p (£48,000) on 24 March, before chairman and chief executive Said Darwazah stepped up to the plate yesterday, increasing his interest in the company by 30,000 shares at 1,972p (£591,600).

Hikma, which is focused on the US and Middle East markets, has made substantial investment in R&D and M&A in recent years, the benefits of which are expected to accelerate from 2017. At a current share price of 1,960p, the 2017 P/E is about 17, which looks decent value for a company entering a new growth phase. So, this too could be a stock where it might pay to follow the directors.

The post Should You Follow Directors Buying At WM Morrison Supermarkets PLC, Imperial Brands PLC And Hikma Pharmaceuticals Plc? appeared first on The Motley Fool UK.

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

Standard Chartered

At one time the highly-rated darling of the FTSE 100 banks, Asia-focused Standard Chartered has suffered a spectacular fall from grace. The shares, which were pushing close to £20 in 2010, were trading at just a tad over £4.40 when chief financial officer Andy Halford waded into the market last Thursday.

Mr Halford splashed out £616,644 on 140,000 shares, buying at a discount of more or less 50% to the bank’s tangible net asset value, and 10.6 times forecast 2017 earnings.

Of course, Standard Chartered is in the midst of a restructuring as it seeks to tighten risk controls and improve cost efficiency, so asset values and earnings forecasts may be vulnerable to downward revision. Judging the right time to buy into a recovery story is always difficult — and managing to buy at the very bottom is a matter of pure luck — but Mr Halford evidently sees good value at £4.40.

The shares are up to £4.66, as I’m writing, but that needn’t put you off: chief executive Bill Winters and a number of other execs saw value at around £6 when buying heavily four months ago.

Hutchison China MediTech

Hutchison China MediTech (Chi-Med) holds the distinction of being a rare London-listed Chinese company that hasn’t destroyed investors’ wealth and disappeared into oblivion.

The AIM-listed healthcare group had already grown to be valued at over £1bn before recently also listing $101m of American depositary shares (ADSs) on the Nasdaq stock exchange.

At the end of last week, Chi-Med’s chief executive, Christian Hogg, bought 36,600 ADSs at $13.50 a pop. An ADS represents one half of one ordinary share, so Mr Hogg’s purchase was the equivalent of 18,300 shares at a bit over £19, for a total outlay of around £350,000.

Chi-Med’s revenues are growing fast — up 104% last year — but the company continues to plough profits from its commercial arm (prescription and over-the-counter business) into advancing its exciting drugs pipeline. The company is difficult to value, but you can buy the shares today at the same level at which the chief executive was happy to buy.

Britvic

Soft drinks group Britvic has made a strong recovery since the 2008/9 financial crisis, including fighting off a takeover bid by fellow FTSE 250 firm AG Barr in 2013. However, Britvic’s shares have been moving sideways in a £6.50 to £7.50 trading range for a couple of years. There’s been no significant director buying during the period … until this month.

New non-executive director Sue Clark (also currently managing director of SABMiller Europe) made a maiden purchase of 15,000 Britvic shares at just above £7 a share, for a total investment of £105,235 — or, about twice her basic fee as a non-exec.

The purchase came after Chancellor George Osborne’s budget announcement of a sugar levy on soft drinks. The shares are only marginally higher today, and a rating of around 15 times forecast earnings for the company’s financial year ending 30 September, with a dividend yield above 3%, looks decent value.

The post Should You Follow Directors Buying Shares At Standard Chartered PLC, Hutchison China MediTech Limited And Britvic Plc? appeared first on The Motley Fool UK.

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• 47% under ‘fair’ value, with 9% annual forecast earnings growth! 1 FTSE 100 gem to buy today?

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