Costa Group Holdings Limited produces, packs, markets, and exports fruits and vegetables to food retailers in Australia. Costa Group Holdings is one of Australia’s some insider buying over the past three months, with insiders investing in more than 8 million shares during this period. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic 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.
See our latest analysis for Costa Group Holdings
Who Are Ramping Up Their Shares?
There were more Costa Group Holdings insiders that have bought shares than those that have sold. In total, individual insiders own over 18 million shares in the business, which makes up around 5.65% of total shares outstanding. Insiders that have recently bought more shares are: Janette Kendall (board member) and Peter Margin (board member) .
The entity that bought on the open market in the last three months was
Antares Capital Partners Pty. Ltd. MLC Investment Management Limited MLC Investments Limited OneVue Limited UBS Asset Management. 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’ earnings expectations of 81.83% over the next three years illustrates an exceptional outlook for the business which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,Costa Group Holdings is believed to experience a healthy double-digit top-line growth next year, which seems to drive higher expected earnings growth as well. This could indicate significant cost-cutting activities or a high degree of economies of scale which may have a compounding impact in the future. Insiders’ conviction in this strong performance is illustrated by their ramp up in shareholdings. Or they may merely believe the stock is undervalued by the market relative to the growth potential it will deliver.
Did Insiders Buy On Share Price Volatility?
An alternative reason for recent trades could be insiders taking advantage of the 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. Costa Group Holdings’s shares ranged between A$6.72 and A$5.73 over the past three months. This indicates moderate volatility with a share price movement of 17.28%. This may not be large enough to warrant any significant purchases, therefore the underlying driver may be the insiders’ belief of company growth prospects or simply their personal portfolio rebalancing.