Once a week I like to take a look to see which shares have experienced meaningful insider buying.

This is because insider buying is often regarded as a bullish indicator, as few people know a company and its intrinsic value better than its own directors.

A number of shares have reported meaningful insider buying this week. Here are a couple which have caught my eye:

Dicker Data Ltd (ASX: DDR)

According to a change of director’s interest notice, this distributor of computer software and hardware has experienced more insider buying this month. The company’s Chief Operating Officer and Executive Director, Vladimir Mitnovetski, has added to his considerable holding. Mr Mitnovetski picked up 5,000 shares through an on-market trade on May 27. The director paid an average of $7.40 per share, which equates to a total consideration of $37,000.

Mr Mitnovetski has made several purchases over the last 12 months and now owns a total of 831,961 Dicker Data shares.This has proven to be an astute move.  The company’s shares have rallied over 50% higher since this time last year. And judging by his latest purchase of shares, this director sees further gains ahead.

TechnologyOne Ltd (ASX: TNE)

The directors of this enterprise software company have been busy buying and selling its shares this month. Masterbah Pty Ltd, of which Non-Executive Director John Mactaggart and Chairman Adrian Di Marco have a beneficial interest in, offloaded 4 million shares for a total of $36.8 million through an on-market trade on May 26. Fellow Non-Executive Director Ronald McLean sold 41,263 shares for $394,450.06 the same day through an on-market trade.

However, one director was still buying. The following day Peter Ball picked up 5,000 shares for a total of $47,715.36. This director appears to believe TechnologyOne’s shares are in the buy zone following a pullback after the release of its full year results.

More reading

• Build wealth for life with these 2 ASX 200 shares
• 3 top ASX dividend shares to buy in June
• ASX 200 up 1.7%: Flight Centre and Webjet rocket, Afterpay hits record high
• Why Leigh Creek, Lynas, Monadelphous, & TechnologyOne are dropping lower
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Insiders have been buying these ASX shares this week appeared first on Motley Fool Australia.

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How connected are the S&P/ASX 200 Index (ASX: XJO) and the broader ASX share market to the Australian economy as a whole?

If the ASX 200 is having a good year, it’s often cited as a barometer of the economy as a whole. And if there’s an economic recession on the horizon, you’ll usually find the share market isn’t doing so well.

So case closed, right?

Well, not quite.

See, the economy is just another name for the commercial network that connects every consumer and business within our society. The government forms a major part of the economy, as does overseas investment.

In contrast, the share market represents the value of every public company in the country. Nothing more, nothing less.

And the health of the economy is only one factor that influences how much investors are willing to pay for each company (represented by each company’s share price).

Mixed messages

Just take last year. In 2019, the ASX 200 had one of its best years in recent times, banking a 20.8% gain over the year. That was in stark contrast to the broader economy, the growth of which was so slow it prompted the Reserve Bank of Australia (RBA) to cut interest rates 3 times in 2019.

These interest rate cuts were a large driving force behind the share market gains. Lower interest rates lead to higher values being placed in riskier assets like shares. This in itself proves that the ASX 200 doesn’t always move in tandem with the economy.

Another point to note is that the share market is a forward-looking mechanism. This means it is always trying to price in the most likely future scenario of economic growth. As such, the share market is not necessarily a reflection of where an economy is at the present.

This is why we’ve seen a massive rally in the ASX 200 since mid-March. And this growth hasn’t corresponded to our economy improving over the same period. Rather, it’s the signs that the economy is likely to improve over the rest of 2020 that is causing the ASX 200 to surge.

The same thing occurred back in 2009 when the world was just starting to recover from the global financial crisis. The ASX 200 had one of its best years ever in 2009 – rising over 30%. In contrast, it took a few more years for the economy to bounce back fully.

Foolish takeaway

The share market is heavily influenced by the economy, but not in ways that are always obvious or easy to predict. It’s probably better to think of the ASX 200 as being shaped by what investors think the economy of tomorrow is going to look like. Of course this sentiment should also be considered in combination with other macro-factors like interest rates, unemployment and geopolitical tensions on the world stage.

All in all, I believe success with investing depends on finding long-term, winning companies. This means investing in companies that have the ability to weather the economy’s ups and downs rather than trying to predict what the ASX 200 will do over the short term.

More reading

• Is the Fortescue share price under threat from a potential multi-million dollar earnings hit?
• Brokers name 3 ASX 200 shares to buy right now
• Ready to invest your first $1,000? Try these 2 ASX shares
• 3 cheap ASX 200 shares I’d buy today
• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How does the economy affect the ASX 200 share market? appeared first on Motley Fool Australia.

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The Austal Limited (ASX: ASB) share price is up 8.91% at the time of writing after updating its full year guidance today. The company reported that full year revenue would likely increase by $100 million to $2 billion. Accordingly, earnings before interest and taxes would increase by $15 million.

This, along with many other positive announcements, sets the company up for an explosive growth spurt.

An undervalued gem

The Austal share price plummeted earlier in the month after news that it had lost a major contract to a lower priced competitor. But I think the market has oversold this company significantly, creating a fantastic buying opportunity. 

In fact, on the same day that Austal announced its lost contract, it also announced an additional $324 million contract for the Royal Australian Navy. 

Its location is also noteworthy. Recently, I visited the US town where Austal’s US production facilities are located – Mobile, Alabama. It is hard to overstate the impact of the company there. The town of Mobile runs on the Austal operations. Aside from strategic and tactical military goals, US defence spending is designed to create jobs. In my opinion, there is no way Austal could have won any US defence work from an Australian manufacturing location – it just wouldn’t happen.

Why Austal shares are ready for explosive growth

Austal revealed an order book worth $4.3 billion in its FY20 H1 report. It has also announced considerable contract wins since that time. Over the past 5 years, the Austal share price has grown by about 12% per year on average. Its current price-to-earnings ratio is 14.9 (at the time of writing), and over the past 9 years its average P/E has been closer to 17.

This company is right in my sweet spot as an investor in manufacturing companies. It has already spent the money to build the infrastructure, has impressive relationships, and is built on a track record of honesty and quality products. I think Austal shares are likely to see explosive growth over the next 1–2 months. 

More reading

• Why Afterpay, Austal, Kogan, & Northern Star shares are charging higher
• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire
• The best performing ASX 200 stock today may have more room to climb
• ASX 200 Weekly Wrap: ASX rallies on mining highs
• 5 ASX 200 winners and 4 losers of last week

Daryl Mather owns shares of Austal Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why this ASX 200 share is up 8% and poised for more explosive growth appeared first on Motley Fool Australia.

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