Fairfax Media Limited operates as a digitally progressive media company in Australia and New Zealand. Fairfax Media is one of Australia’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 151 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A two-decade research published in The MIT Press (1998) showed 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 will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.
View our latest analysis for Fairfax Media
Which Insiders Are Buying?
There were more Fairfax Media insiders that have bought shares than those that have sold. In total, individual insiders own over 12 million shares in the business, which makes up around 0.52% of total shares outstanding. Latest buying activities involved the following insiders: Linda Nicholls (board member) , Nicholas Falloon (board member) and Todd Sampson (board member) .
The entity that bought on the open market in the last three months was
BlackRock Inc. Colonial First State Asset Management (Australia) Limited FIL Limited 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?
On the surface, analysts’ earnings growth projection of 19.62% over the next three years provides a good outlook for the company which is consistent with the signal company insiders are sending with their net buying activity. Delving deeper into the line items,analysts anticipate decline in top-line growth next year, which could imply some headwinds going forward. Though, next year’s expected earnings will deliver a sizeable growth which may indicate the company’s cost controls will show meaningful results, offsetting the fall in revenue growth. Insider buying activities show that they have confidence in its ability to continue growing. They could believe the company is in the midst of a successful turnaround or simply deem the stock is well-below its intrinsic value, with negative sentiment over-discounting the share price.