2iQ Insider Brief: BAYN:GR, TESB:BB, EGN:US

Patrick Hable 2 July 2018

Bayer AG (BAYN: GR)

12-month performance: -21%
Insider activity: Bullish
Buying pattern: Large CEO purchase
Recent news: Rights issue announced to fund purchase of Monsanto Corp

Bayer AG is a German multinational pharmaceutical and life sciences company, headquartered in Leverkusen. The group operates across four key divisions, including pharmaceuticals, consumer health, crop science and animal health. The stock is a constituent of the Euro Stoxx 50 index.

Bayer shareholders have endured a challenging period over the last 12 months. In June 2017, the stock plunged sharply after the company issued a profit warning over weak performance at its agrochemical and over-the-counter medicine units and downgraded its full-year profit forecasts.

And the stock has continued to trend down as the consumer health unit has struggled to maintain growth momentum in the US, sales and earnings have continued to miss expectations, and the group announced that it would be raising €6 billion in a rights offering and €20 billion from bonds sales to help fund its $66 billion purchase of agricultural company Monsanto Corp.

Yet, after a 21% share price fall over the last year, is now the time to take a closer look at Bayer? Analysis of insider transactions suggests it may be. Recently, we have seen several large stock purchases from CEO Werner Baumann, which is a bullish signal, as a CEO is likely to have significant insight into a company’s future prospects.

Bayer AG

Baumann purchased several large tranches of Bayer stock during June, and also exercised his subscription rights to acquire more shares. It’s worth noting that Baumann has a ‘long-term trading IQ’ of 110, which indicates that he has a good track of timing his purchases well. With that in mind, we think that Bayer shares could offer upside from here.

Tessenderlo Group N.V. (TESB: BB)

12-month performance: -13%
Insider activity: Bullish
Buying pattern: Large Co-CEO purchase
Recent news: 2017 results missed expectations

Tessenderlo Group is a diversified industrial group that focuses on agriculture, bio-resources and industrial solutions. Headquartered in Brussels, the group serves customers in the agriculture, health and consumer goods markets. Tessenderlo shares fell sharply in March, when the group released 2017 results and reported REBITDA that was slightly lower than expected. However, the stock has stabilized over the last few months.

Down 20% since early October, it now the time to be buying Tessenderlo? An analysis of insider transaction activity suggests that now could indeed be a good time to look at Tessenderlo, as in the last month we have seen intense buying activity from Co-Chief Executive Officer Luc Tack. 

Tessenderlo Group

It’s not unusual for Tack to acquire shares in Tessenderlo. In the past, the key insider has often made multiple purchases per month. However, in June, Tack made eight separate purchases, acquiring around $14 million worth of stock. That takes his overall spending on the stock to around $175 million, which we believe is worth noting. Not only does the Co-Chief Executive Officer have considerable ‘skin in the game,’ but he has also upped his holdings significantly. 

Energen Corp (EGN: US)

12-month performance: +47%
Insider activity: Bullish
Buying pattern: Large activist investor purchase
Recent news: Activist investor increasing stake

Energen Corp is an oil and gas exploration and production company that primarily operates in the Permian Basin in West Texas and New Mexico. The Permian Basin is the “largest and most important source of oil supply growth in the world,” according to analysts at consulting firm Wood Mackenzie, and Energen is well placed to capitalize on the emergence of the oil patch, as it owns 150,000 acres in the region.

Energen’s share price has performed well over the last year, which is no surprise, given the strength of oil prices. However, looking at recent insider transaction activity, we believe there could be further upside potential.

Energen Corp

Recently, activist investor Carl Icahn has been increasing his stake in the company, making several large stock purchases in June. Icahn and hedge fund manager Keith Meister of Corvex Management are eyeing a potential joint takeover of the company as they believe the Permian oil producer could be an attractive acquisition for an oil major. In a recent interview with CNBC, Icahn stated that Energen looks “very undervalued” and that the stock could be worth “well over $100 per share.” With that in mind, we believe Energen is a stock to keep a close eye on.

 

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