There have been some hefty director share purchases in recent days at BHP Billiton (LSE: BLT), Prudential(LSE: PRU) and ITV (LSE: ITV). Should you follow the directors, and load up on shares of these three companies?
All miners are hurting at the moment, and Anglo-Australian giant BHP Billiton is no exception. In its half-year results last month, the company abandoned its progressive dividend policy and slashed its interim payout by 74%, as it sought to protect its balance sheet through the bottom of the commodities cycle.
With the shares having slumped to around a third of their peak value, a number of non-executive directors substantially increased their stakes in the company last week.
Malcolm Brinded snapped up 28,000 shares at 815p a pop for a total outlay of £228,200; and his purchase followed a £139,360 splurge on 16,000 shares at 871p by Baroness Shriti Vadera. Meanwhile, over on the Sydney stock exchange, $218,885 changed hands as fellow non-execs Carolyn Hewson and Lyndsay Maxsted also upped their interests.
Billiton's shares closed yesterday at 765p, so you can pick them up at a nicer price than the directors were happy to pay -- and that might not be a bad idea for patient investors willing to take a long-term view.
Top FTSE 100 insurer Prudential last week posted forecast-beating results for 2015. The company upped its full-year dividend by 5% to 38.78p and declared a 10p special dividend on top.
The day after the results, non-executive director Kai Nargolwala waded into the market to net 20,000 shares at 1,342.51p a time, reducing his bank balance by £268,502, but increasing his stake in Prudential to 70,000 shares. This was his first purchase in almost three years, so he appears to see good value in the shares, which peaked at over 1,700p 12 months ago.
The shares closed yesterday a tad below Mr Nargolwala's buy price, and look attractively-rated at little more than 11 times forecast earnings for 2016.
Last month, ITV announced that non-executive director Sir Peter Bazalgette would be stepping up to the role of chairman on 12 May. At the time of the announcement, Sir Peter had a modest holding of 13,685 shares, largely accumulated under an arrangement whereby non-execs agreed to use a proportion of their annual fees to make quarterly purchases.
However, after ITV released its annual results earlier this month, Sir Peter wasted little time in making a purchase that totally eclipsed his previous forays into the market. He bought 150,430 shares at 231.5p a time, making a substantial investment of £353,661.
ITV delivered an annual dividend of 6p for 2015 (ahead of guidance) and, like Prudential, declared a 10p special as well. The shares are a little higher since Sir Peter's purchase -- closing yesterday at 244p -- but with the board signalling a positive outlook for 2016, a rating of 13.5 times forecast earnings looks reasonably good value.
Finally, here at the Motley Fool we believe you don't have to be a highly-paid company director to benefit from share ownership. Indeed, our experts have demonstrated that a seven-figure-sum stock portfolio is within the reach of many ordinary investors.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.