One thing I always keep an eye on when researching stocks to buy is director dealing. Corporate directors have far more information on their businesses than the rest of us. If they’re buying company stock, it’s often worth taking a closer look.
Here, I’m going to highlight some interesting director dealing I’ve spotted recently. Should I follow these insiders into these stocks?
£99k buy from the CFO
Let’s start with asset manager abrdn (LSE: ABDN). Here, CFO Stephanie Bruce bought 66,709 shares at an average price of 148p on 5 September. This purchase cost the insider around £99,000.
I think it’s significant that abrdn’s CFO has bought stock. Finance chiefs are top-level insiders and they generally have an excellent understanding of their companies’ operating activities and financials. I also think it’s interesting that Bruce has invested nearly £100k in stock. This suggests she’s quite confident Abrdn’s share price is set to rise.
However, it’s worth pointing out that she also made large purchases in March and December when the stock was trading at much higher levels. So her track record, in terms of timing, isn’t great.
Would I buy abrdn shares today? The answer to that is no. The stock does offer a high yield. However, I have a few concerns in relation to the company’s competitive advantage.
It’s worth noting that analysts at Deutsche Bank just downgraded the stock from ‘hold’ to ‘sell’.
Purchases from the CEO and CFO
Next up is housebuilder Vistry (LSE: VTY). Here, both CEO Greg Fitzgerald and CFO Earl Sibley bought stock on 8 September when it was trading at 804p. Combined, the two insiders spent around £248,000 on stock.
So now we have two top-level directors buying stock. That’s notable, to my mind. The more insiders buying, the more powerful the trading signal.
Vistry shares do look cheap at present. Currently, they trade at just five times this year’s earnings forecast. So there could be some value on offer here right now.
Having said that, I see this stock as quite risky, given current economic conditions. In recessions, housebuilders tend to underperform.
Given the risks, I think the safest move for me is to leave this stock alone for now.
£102k buy from a clued-up director
Finally, AIM-listed Alpha FX (LSE: AFX). It saw a £102,000 buy from board member Lisa Gordon on 13 September.
This director dealing activity looks really interesting to me due to the fact that Gordon has an investment background. Earlier in her career, she worked as an equity analyst. Meanwhile, she is also Chair of stockbroker Cenkos Securities. So we can assume she knows what she’s doing here.
Alpha FX continues to grow at a strong rate. Recently, the group posted revenue growth of 35% for the first half of 2022. And founder and CEO Morgan Tillbrook was very optimistic about the future.
“Although much of the world is moving into a challenging macro environment, I have never felt more confident about the potential of the business and our long-term growth prospects,” he said.
Putting this all together, I’d buy Alpha FX shares for my portfolio today. The stock isn’t cheap, so there is some valuation risk. However, all things considered, I see the risk/reward proposition here as attractive.
