Chris Morris, Computershare’s (ASX: CPU) founder, has been a consistent seller of shares in his company over the past few years. It’s of no great concern; entrepreneurs get bored like the rest of us and he has instead turned his attentions to the tourism and entertainment sector.
(Incidentally Morris is not the first rich-lister to buy hotels, islands, breweries and the like. But tourism assets are perhaps more of a lifestyle purchase than a money-making venture. Morris recently also bought the Townsville casino because casinos ‘allow you the cash flow to do other things’.)
Morris is still Computershare’s largest shareholder and chairman of the company. He knows the business inside out and fellow shareholders should be glad of his expertise on the board.
Last week Computershare reported its earnings result (see Computershare: Result 2015). As often happens, it was the outlook rather than the result itself that worried investors. Management announced the company’s earnings (reported in US dollars) would probably fall by around 7.5% in 2016.
It’s hardly a disaster but the share price tumbled anyway. The stock is now down about 20% since July.
Morris’s response has been intriguing. Since the result was announced, he has switched from seller to buyer, picking up 67,000 shares at an average price of about $9.90.
It’s not a huge number next to his existing 37.6m shares. Indeed, perhaps he’s just flagging to the market that the stock had fallen too far too fast.
But Computershare certainly looks excellent value according to some basic valuation statistics. You don’t get an opportunity to buy shares in a global company that dominates its industry on a 9% free cash flow yieldevery day.
Morris’s buying should make investors sit up and take notice. When the individual who knows the business better than anyone – its founder – switches tack, he’s saying something.
Just what that is, we’ll leave up to you.
To get more insights, stock research and BUY recommendations, take a 15 day free trial of Intelligent Investor now.
Disclosure: The author owns shares in Computershare and has recently bought more. Please consider your own circumstances before buying this stock or any other.