Origin Energy Limited’s’ (ASX:ORG) is one of Australia’s large-cap stocks operating in the AU Oil and Gas industry. Origin Energy saw some insider buying over the past three months, with insiders investing in more than 6 million shares during this period. Generally, insiders buying more shares in their own firm sends a bullish signal. A two-decade research published in The MIT Press (1998) showed 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.
View our latest analysis for Origin Energy
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Origin Energy’s’ insiders. In total, individual insiders own over 2 million shares in the business, which makes up around 0.14% of total shares outstanding. .
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.
Is This Consistent With Future Growth?
At first glance, analysts’ revenue growth expectations of 10.08% 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. Digging deeper into the line items,Origin Energy is expected to experience a limited level of revenue growth next year, 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?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. Within the past three months, Origin Energy’s share price traded at a high of A$9.76 and a low of A$7.85. This suggests moderate volatility with a share price movement of 24.33%. 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.