Following the recent annual results where management forecast a bright outlook, new stores, and continued sales growth in 2018, Adairs Ltd (ASX: ADH) directors have put their money where their mouth is.
Director, former CEO and member of the founding family, David Maclean, purchased another 275,000 shares – worth $400,000 – on the open market just last week. That takes his total shareholding to just under 4.6 million shares, or 2.7% of the company.
Another director, Michael Cherubino, also acquired 50,000 shares – taking his stake to 2.2 million shares. Management at Adairs looks generally well-aligned with shareholders, and all told the board owns around 5% of the company.
Should you buy Adairs?
It's hard to argue with a $400,000 purchase, but it's also important to place the purchase in context of the buyer's material wealth. With $6.9 million in Adairs shares and potentially more in his private wealth, a $400,000 purchase looks like a meaningful but modest investment – equivalent to about 2 years' worth of dividends.
Investors shouldn't invest in Adairs, or any company, just based on the strength of recent management purchases or sales.
As to whether Adairs shares are an opportunity today, I'm a bit ambivalent. The real opportunity was when they were at $0.60 or $0.80 back in June, whereas today they are priced in line with other retailers. With a 5% dividend, new stores, and recent strong growth expected to continue, Adairs doesn't have to achieve much to beat the market over time, but it is hard to see the company becoming a huge winner, given a competitive retail environment. I'm not racing out to buy Adairs shares today.
