I always find it interesting to note down UK share purchases from directors. It’s true that I don’t know the exact reason behind why they purchase stock in a firm. But based on the information I do have, it can indicate that the insider believes the company could do well going forward.

In other words, they’re putting their money where their mouth is. Here are two recent examples.

Buying a potential dip

The first one is ASOS (LSE:ASC). Last week, it was announced that the CFO Dave Murray had purchased 5,800 ordinary shares in the business. This had a monetary value of £20,065.25.

What’s interesting here is that Murray took on the CFO role relatively recently (in April). This came as the ASOS financial performance had disappointed investors, noted by the fact that the stock’s down 54% over the past two years. Over a shorter one-year time horizon, the share price is down a more measured 8%.

The struggle here has been that inventory hasn’t been shifting as quickly as needed. This has caused pressure on cash flow as money’s tied up in stock that isn’t selling. Even though this is being addressed, the full-year results out earlier this month showed a loss before tax of £379.3m. This is an increase of the loss of £296.7m from last year.

The fact that the CFO has made a share purchase is encouraging. It helps to align him to the interest of other shareholders, namely to stop the fall lower! Even though he’s an experienced figure that could help to turn the business around, I’m not convinced that now’s the best time for me to buy.

Non-exec action

Another purchase that caught my eye late last week was at Associated British Foods (LSE:ABF). The FTSE 100 giant reported that non-exec director Loraine Woodhouse had bought 41,720 ordinary shares for a value of £99,477.84.

Non-exec directors aren’t directly involved in running a company. Rather, they’re often brought in to advise on strategy and be an independent voice for the internal management team. It’s unclear as to whether the share purchase was part of her overall compensation package, or if it was her active choice.

Either way, I feel that it’s a good sign for investors. She has a vested interest to provide good advice to help the defensive stock outperform. If it was her active decision to purchase the stock, it’s clear that she feels it could do well going forward.

I agree that ABF stock could rally in the coming year. It’s down a modest 3% in the past year, but the annual results from November showed operating profit up 40% year-on-year. It all filtered down to a 43% surge in profit before tax. This was partly driven by easing supply chain issues, sales growth from retailer Primark and a low cost base.

This bodes well for the future, although I’m conscious that further planned growth in the US could be difficult due to high competition in a foreign market. Ultimately, it’s a stock I’ve got on my watchlist for now.