Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • AUD/USD

    0.6530
    +0.0012 (+0.18%)
     
  • OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD

    2,254.80
    +16.40 (+0.73%)
     
  • Bitcoin AUD

    107,856.04
    -700.44 (-0.65%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6045
    +0.0011 (+0.18%)
     
  • AUD/NZD

    1.0906
    +0.0004 (+0.04%)
     
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NASDAQ

    18,254.69
    -26.15 (-0.14%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,807.40
    +47.29 (+0.12%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     

Did Insiders Buy On BlueScope Steel Limited’s (ASX:BSL) Price Volatility?

BlueScope Steel Limited produces and sells metal coated and painted steel building products in Australia, Asia, North America, New Zealand, and internationally. BlueScope Steel is one of Australia’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 15.32 million shares during this period. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. The MIT Press (1998) published an article showing that stocks following insider buying outperformed the market by 4.5%. But these signals may not be sufficient to gain confidence on whether to invest. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.

View our latest analysis for BlueScope Steel

Who Are Ramping Up Their Shares?

ASX:BSL Insider Trading August 13th 18
ASX:BSL Insider Trading August 13th 18

Over the past three months, more shares have been bought than sold by BlueScope Steel’s’ insiders. In total, individual insiders own over 3.46 million shares in the business, which makes up around 0.64% of total shares outstanding. . The entity that bought on the open market in the last three months was BlackRock Inc. New York Life Investment Management LLC The Vanguard Group Inc.. 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 This Consistent With Future Growth?

ASX:BSL Future Profit August 13th 18
ASX:BSL Future Profit August 13th 18

Analysts’ expectations for earnings over the next 3 years of 17.99% provides a good outlook for the company which is consistent with the signal company insiders are sending with their net buying activity. Digging deeper into the line items, analysts anticipate a restrained level of top-line growth over the next year, but a double-digit earnings growth at 29.92%. This may mean the company’s cost-cutting initiative will be significant enough to boost earnings. Net buying could signal high insider confidence, perhaps due to their belief of sustainable growth. Or they may simply see the current stock price is undervalued relative to intrinsic value.

Did Stock Price Volatility Instigate Buying?

An alternative reason for recent trades could be insiders taking advantage of the share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. In the past three months, BlueScope Steel’s share price reached a high of A$18.77 and a low of A$16.79. This indicates an immaterial change in share price, with a movement of 11.83%. Insiders’ purchases may not be driven by this movement but perhaps their view of the company’s growth in the future or simply their individual portfolio rebalancing.

Next Steps:

BlueScope Steel’s net buying tells us the stock is in favour with some insiders, which is relatively consistent with expected earnings growth, even if the low share price volatility did not warrant exploiting any mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I’ve compiled two important factors you should further research:

ADVERTISEMENT
  1. Financial Health: Does BlueScope Steel 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.

  2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of BlueScope Steel? 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.