Why Did AT&T Inc's' (NYSE:T) Insiders Buy Up More Shares?

AT&T Inc. provides communications and digital entertainment services. AT&T is one of United States’s large-cap stocks that saw some insider buying over the past three months, with insiders investing in 30,597 shares during this period. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider buying outperformed the market by 4.5%. However, it may not be sufficient to base your investment decision merely on these signals. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.

View our latest analysis for AT&T

Who Are Ramping Up Their Shares?

There were more AT&T insiders that have bought shares than those that have sold. In total, individual insiders own over 6 million shares in the business, which makes up around 0.09% of total shares outstanding. Insiders that have recently bought more shares are:

Name	Management	Board	Total Annual Compensation
John Donovan	✔		$9,508,810
Richard Fisher

Is This Consistent With Future Growth?

On the surface, analysts’ earnings growth projection of -36.73% over the next three years provides poor outlook for the company, however, this is contrary to the signal company insiders are sending with their net buying activity. Delving deeper into the line items,AT&T is expected to experience a limited level of revenue growth next year, and along with high cost growth, is expected to contribute to a highly negative expected earnings growth. This illustrates that cost growth has excessively exceeded that of the top-line, leading to an unsustainable decline in earnings. However, insiders may view this as a time of investing and growth given their bullish ramp up in shares. Or they may simply believe the stock is below intrinsic value, giving them motivation to buy now.

Did Stock Price Volatility Instigate Buying?

Alternatively, the timing of these insider transactions may have been driven by share price volatility. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook. In the past three months, AT&T’s share price reached a high of $39.18 and a low of $35.57. This indicates a trivial share price movement, with a change of 10.15%. Potentially, insider transactions are not share price related but may be due to their belief on what will happen to the company in the future or simply just personal portfolio rebalancing.

Next Steps:

AT&T’s insider meaningful buying activity tells us the shares are currently in favour, however, earnings expectations tell a different story, and the share price movement may be too trivial to cash in on any mispricing. Although insider buying can be a useful prompt, following the lead of an insider, however, will never replace diligent research. I've put together two fundamental factors you should further research:

1. Financial Health: Does AT&T have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of AT&T? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.