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Last Wednesday (16 April), FTSE 100 dividend stock Bunzl (LSE:BNZL) fell a whopping 26%. The move came after the distribution and outsourcing company – which in the past was quite a reliable performer – announced that it was cutting its 2025 outlook and pausing its share buyback programme.
Now, what’s interesting is that immediately after the share price fall, several directors bought stock. Could this signal that there’s an opportunity for investors here right now?
Analysing insider transactions
Research has shown that insider transactions can provide valuable trading signals. However, not all insider trades are created equal. For those interested in following such transactions in an effort to identify attractive investment opportunities, there are a few things to look for.
One is large buys from top-tier insiders. Generally speaking, top-level insiders have more knowledge of their companies than those lower down the hierarchy. If these insiders are spending a lot of their own money on company stock, it’s a good sign.
Another thing to look for is ‘cluster buying’. This is where three or more insiders are buying stock simultaneously. This indicates that there’s a consensus within the company that the stock’s cheap.
Bullish buying
Zooming in on the director transactions at Bunzl, they look interesting to me. On the same day the share price crashed, three directors stepped up to buy and they went in aggressively.
CEO Frank van Zanten bought 47,655 shares, spending about £1.1m on stock. Meanwhile, CFO Richard Howes snapped up 8,479 shares, in a trade worth about £200,000. And UK and Ireland finance director Andrew Mooney also got in on the action, buying 5,000 shares in a trade worth about £120,000.
Overall, I see this trading activity as bullish. All three are likely to have a good understanding of the company’s prospects, and they’ve put a fair bit of their own money to work.
Digging deeper
Of course, an investor should never make a decision based purely on insider transactions. It’s important to look at what’s going on.
In this case, Bunzl said that its North American business – which primarily caters to food service and grocery customers – was seeing ‘revenue softness’ and that this was hitting operating margins. It added that it was expecting ‘moderate’ revenue growth in 2025 at constant exchange rates – driven by announced acquisitions and broadly flat underlying revenue – with a group operating margin of just below 8%, compared to 8.3% in 2024.
However, it also said that it had made some moves to improve performance in the US, including making leadership changes to ensure there’s a focus on commercial agility and operational excellence. It believes this will deliver a stronger and more sustainable platform for long-term profitable growth.
“My confidence in the group’s compounding growth strategy and resilient business model remains unchanged, supported by our continuous focus on improving our offering to customers,” commented van Zanten.
Worth considering?
In light of the fact that the company’s making moves to improve its performance, and that management’s still confident about the future, I think Bunzl shares are worth considering today.
Further challenges in the US are a risk in the near term however, with the shares now trading on a trailing price-to-earnings (P/E) ratio of less than 15 and sporting a dividend yield of around 3.4%, I think they have the potential to do well in the long run.
