This FTSE 100 stock is down 50%, and the director recently bought 8,000 shares

A cheap one FTSE 100 stock that caught my attention Prudential (LSE: PRU). It is down 21% in 2024, 37% over one year, and a peak of 50% over three years.

In my opinion, this always undervalues ​​life insurance relative to its long-term potential. And it seems I'm not the only one who thinks this because a non-executive director at Prudential recently bought shares.

On 4th July, George Sartorel collected 8,000 shares at 725p for a total value of £58,000. This follows recent purchases by other directors, and in June, CFO Ben Bulmer took 50,000 shares at an average price of 761p for a total of £380,795.

However, the share price keeps falling. As I type, it is now at 676p. That's its lowest level since mid-2012!

Why insiders buy

There can be any number of reasons why an insider sells shares. Perhaps they have a tax debt, want to sponsor a family member's wedding, or have been advised to divide their assets.

But insiders buy stocks with their own money for one reason. They think the stock is unknown.

Therefore, it is often considered a vote of confidence in the business. After all, who knows a company's prospects better than the people who run it?

With the benefit of hindsight, some of my worst investments have been when there was a lack of insider buying (not to be confused with insiders. to tradeillegal).

For example, Ginkgo Bioworks (one of my worst picks before I sold) has lost 87% of its market value in the past year. But other than a few purchases in May, no company insiders were buying the stock on the cheap. Actually, the opposite.

The lesson for me is that if the executives who run the company don't see a profit in their stock being beaten down, this can be a red flag. Many Prudential insiders are increasing their skin in the game, so this is a green flag to me.

Prudential is also buying back shares

In June, the Asia-focused insurer announced a massive $2bn share buyback program to begin between now and mid-2026. This represents about 8% of its remaining stock!

It also said that the dividend for the year 2024 will increase by 7-9%. The forward yield is only 2.5%, but it has the potential to rise as the company gets back on track after hitting the mud during the turmoil.

Looking ahead, Prudential remains focused on its prospects across its markets in Asia and Africa. These countries have a combined population of 4bn and greater growth potential than the West due to increased levels of insurance adoption.

Another risk here is China, a large market where consumers continue to withdraw from spending. This may affect the company's growth rates in the future. It's something to keep in mind and seems to have weight in share price.

A possible trade-off

However, net profit this year is forecast to be $2.5bn, up from $1.7bn last year. And the stock trades at just 9.1 times this year's expected earnings per share. That is cheaper than the FTSE 100 average.

If I have money to invest in August, I will follow those guides and add this stock that has declined to my portfolio.