AGCO Corporation (AGCO): Massive Insider Buys By A Director

Long-Term Outlook and Possible Motives

Given Srinivasan’s aggressive and seemingly out-of-the-blue move to accumulate shares in AGCO, it is entirely appropriate to search for a motive for her actions. While the company appears to be performing fairly well, it operates in a competitive industry that is dominated by larger players, and thus is not a candidate for explosive growth. The company’s recent decision to initiate a dividend may have some bearing on Srinivasan’s interest.

Alternatively, it is possible that Srinivasan wishes to play a larger role in the company’s decision-making process. Given the size and rapidity of her purchases, it seems fair to question whether she will be a passive shareholder. What’s more, her strong ties to a family-owned tractor business in her native country may well endear her to AGCO Corporation (NYSE:AGCO). By growing her stake in the firm and eventually engineering a takeover bid, she could gain a promising American foothold for Tafe Motors. Incidentally, any future transaction that takes AGCO private could benefit the company’s regular shareholders as well.

How to Play This Situation

Given its solid but not spectacular financial situation and growth prospects, AGCO has had lukewarm support from many market-watchers. Although the company’s share price has risen during the past year, it remains below its two-year highs.

The combination of an ongoing share buyback program and Srinivasan’s aggressive buying suggests that AGCO has more room to run. Although it is premature to suggest that a takeover or going-private transaction will happen in the near future, investors who cannot discount this possibility should consider opening long positions in AGCO Corporation (NYSE:AGCO)’s stock. Even those who believe that Srinivasan’s transactions herald a coming spate of good earnings reports may wish to buy into the stock at this point.

The article Massive Insider Buys By A Director originally appeared on Fool.com and is written by Mike Thiessen.

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