Yahoo Finance Bullish iSelect Limited (ASX:ISU) Insiders Ramp Up Investment In Stock
iSelect Limited provides online comparison and expert advisory services of insurance, utilities, and personal finance products in Australia. iSelect’s insiders have invested more than 71.05 million shares in the small-cap stocks within the past three months. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
See our latest analysis for iSelect
Which Insiders Are Buying?
There were more iSelect insiders that have bought shares than those that have sold. In total, individual insiders own over 6.08 million shares in the business, which makes up around 2.83% of total shares outstanding. . The entity that bought on the open market in the last three months was Forager Funds Management Pty Ltd. Innovation Holdings Australia Pty Ltd Macquarie Group Ltd. Banking & Securities Investments Macquarie Investment Management Australia Limited Quest Asset Partners Pty Ltd. Regal Funds Management Pty Limited Renaissance Smaller Companies Pty Ltd. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is Future Growth Outlook As Bullish?
At first glance, analysts’ earnings expectations of -6.05% over the next three years illustrates negative outlook for the business, however, this is contrary to the signal company insiders are sending with their net buying activity. Delving deeper into the line items, analysts anticipate negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. This is expected to impact its bottom line next year given the large negative growth rate expected, indicating cost-cutting may not be able to pull it through into a positive growth region yet. Although, insiders seem to know something the market does not and have been ramping up their holdings in times of uncertainty. This indicates they may see a turnaround or deem the stock to be over-penalized by negative market sentiment.
Did Stock Price Volatility Instigate Buying?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. iSelect’s shares ranged between A$0.92 and A$0.50 over the past three months. This indicates a substantial share price volatility with a change of 83.27%. This meaningful movement could be a reason why insiders have decided to increase their shareholdings.
Next Steps:
iSelect’s net buying tells us the stock is in favour with some insiders, however, earnings expectations tell a different story, whilst the volatile share price movement could be the incentive to transact. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve put together two important factors you should further examine:
Financial Health: Does iSelect have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of iSelect? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
