In This Article:
The GPT Group is one of Australia’s largest diversified property groups and a top 50 ASX listed company by market capitalisation. GPT Group’s insiders have invested more than 29 million shares in the within the past three months. 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%. However, these signals may not be enough to gain conviction on whether to invest. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.
View our latest analysis for GPT Group
Who Are Ramping Up Their Shares?
There were more GPT Group insiders that have bought shares than those that have sold. In total, individual insiders own over 1 million shares in the business, which makes up around 0.07% of total shares outstanding. The following insiders have recently increased their company holdings: Michelle Somerville (management and board member) , Robert Johnston (board member) and Swe Lim (board member) .
The entity that bought on the open market in the last three months was
BlackRock 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.
Does Buying Activity Reflect Future Growth?
Analysts’ expectations for earnings over the next 3 years of -50.09% provides poor outlook for the company, however, this is contrary to the signal company insiders are sending with their net buying activity. Delving deeper into the line items,analysts anticipate a limited level of revenue growth next year, which impacts its earnings expectation resulting in a highly negative growth rate. Without proper cost controls, earnings could continue to exhibit large negative growth which is unmaintainable. Although insiders may see prosperous times ahead given the current investment period, leading to their conviction to buy. Or else they may simply deem the stock to be undervalued by the negative sentiment.
Did Stock Price Volatility Instigate Buying?
Alternatively, the timing of these insider transactions may have been driven by 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, GPT Group’s share price reached a high of A$5.06 and a low of A$4.63. This suggests an immaterial change in share price, with a movement of 9.29%. This may mean insiders’ motivation to trade may not be driven by the share price but rather other factors such as their belief in company growth or their personal portfolio rebalancing.