Yahoo Finance What Do AMP Limited (ASX:AMP) Insiders Know That You Don’t?
AMP Limited operates as a wealth management company in Australia, New Zealand, and internationally. AMP’s insiders have invested more than 5 million shares in the large-cap stocks within the past three months. Generally, insiders buying more shares in their own firm sends a bullish signal. A research published in The MIT Press (1998) concluded 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.
Check out our latest analysis for AMP
Which Insiders Are Buying?
More shares have been bought than sold by AMP insiders in the past three months. In total, individual insiders own over 2 million shares in the business, which makes up around 0.08% of total shares outstanding. .
The entity that bought on the open market in the last three months was
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 Future Growth Outlook As Bullish?
At first glance, analysts’ earnings expectations of 8.50% over the next three years illustrates a tamed outlook moving forward, however, insiders may be more optimistic than the market, with their net buying activity. Probing further into annual growth rates,analysts anticipate decline in top-line growth next year, which could imply some headwinds going forward. Although, next year’s bottom line growth is expected to positive at 1.65% which could indicate a relatively effective cost management in order to bring the company back to positive earnings. Insiders may have confidence in these cost initiatives, or believe the market has overly penalized the company’s shares, leading to an opportune time to buy.
Did Insiders Buy On Share Price Volatility?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. AMP’s shares ranged between A$5.47 and A$3.62 over the past three months. This indicates a fairly large volatility with a share price movement of 51.1%. This movement is potentially meaningful enough to trade on if insiders believe the market has mispriced their companies’ shares.
Next Steps:
AMP’s insider meaningful buying activity tells us the shares are currently in favour, which is fairly consistent with earnings growth expectations, and a fairly high volatility in share price over the same time period. 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 key factors you should further research:
Financial Health: Does AMP 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 AMP? 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 pass 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.
