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Directors of listed companies must report when they buy or sell shares in a particular company. This gives me a chest of information so I can watch it.
Of course, I don't know for sure why a director might buy, but it would indicate to me that they feel the share price is cheap, or they believe in the long-term future. Here are a few of the latest trades FTSE 250 stocks that caught my eye.
Buying a dip
on monday, Wizz Air (LSE:WIZZ) has confirmed that chief executive Jozsef Varadi has bought 10,000 shares in the airline. The total cost of the purchase was £140,900.
This is a very interesting time to buy as the share price has fallen by 35% in the last month. Last year it decreased by 41%. Business has been struggling in recent months due to engine-related reasons. In the latest update from early August, it had 46 flights on the ground due to tests related to the GTF engine.
This hurts the company, as it ultimately needs fully operational aircraft to increase customer flights and revenue.
However, I do not see this as a long-term issue. I think the CEO's share buying this week reflects the same thinking, because he believes the stock's decline is an overreaction.
Due to the round number of shares purchased, this can also be linked to his compensation. In receiving part of his income in stock, it helps to align his interests with those of other shareholders.
A veteran in the company
Another case on Monday was related to this one Games Workshop (LSE:GAW). Director Kevin Rountree bought 3,654 shares at a price of 10,041p. This came to £366,898.15.
Rountree is the CEO of Games Workshop and first joined the company back in 1998. He already owns shares in the company, so this is a fulfillment of his capital. Given that the stock is up 111% over the past five years, his historic investment may have paid off handsomely.
The stock is down 11% over the past year, despite strong financial results. I think this is partly down to investors having a high benchmark for Games Workshop, given how much it has grown in the past. With a price-to-earnings ratio of 21.80, it's not a cheap stock.
However, I think if we fast forward another five years, the buy-in from the CEO will probably be beneficial. It also makes sense to have a CEO who is interested in making the company play, given his skin in the game.
My actions
Both stocks are on my watch list, with Wizz Air as a value play and Games Workshop as a long-term buy and hold. The CEO's purchase gives me more confidence when considering whether to buy or not. If I have some extra money to spare, I'm thinking about jumping in.
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