Insider Buying

2iQ Insider Brief: Bilia AB (BILIA: SS) MTS Systems Corp (MTSC: US) Palo Alto Networks Inc (PANW: US)

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Bilia AB (BILIA: SS)

12-month performance: +22%
Insider activity: Bullish
Buying pattern: Large purchase from Chairman
Recent news: Good Q3 results

Bilia AB is one of Europe’s largest car dealership chains. The group is engaged in the sale and servicing of passenger cars and transport vehicles and also offers supplementary services such as financing and insurance. It currently has 130 facilities across Sweden, Norway, Germany, Luxembourg and Belgium as well as online auction sites in Sweden and Norway. The stock is listed on the Stockholm Stock Exchange and currently has a market capitalisation of SEK 10.9 billion.

We last covered Bilia on 30 April when the stock was trading at SEK 82. At the time, the group had just issued a solid set of first-quarter results and we noticed that a number of directors had been buying shares – a bullish signal. As a result, we said that “another move higher could still be on the cards.” Fast forward to today, and the stock has risen to SEK 105, after the group recently posted an excellent set of results for the third quarter and announced that it would be buying back shares. This means that following the insider money in late April could have generated a gain of nearly 30% in just over seven months.

one                    Source: 2iQ Research

What’s interesting here is that last week Bilia Chairman Mats Qviberg added another 80,135 Bilia shares to his personal holding, spending SEK 8.5 million (nearly US $900,000) on stock. He paid SEK 105.83 per share. This indicates that the top-tier director continues to see value in the stock, despite the fact that it has risen around 30% over the last six months. Given this large insider purchase, we think the stock has the potential to keep rising.

MTS Systems Corp (MTSC: US)

12-month performance: 0%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including President/CEO
Recent news: Mixed Q4 results

MTS Systems is a supplier of testing systems and industrial position sensors. Operating across the Americas, Europe, and Asia, the group tests the performance and reliability of vehicles, aircraft, civil structures, and biomedical devices. The stock is listed on the NASDAQ Global Select Market and currently has a market capitalisation of $893 million.

In late November, MTS Systems shares fell from $61 to $45 after the group posted mixed fourth-quarter results. While the company reported Q4 revenue growth of 13.2%, adjusted EBITDA declined 9.4% due to the fact that a $4.6 million gain was recognised on the sale of one of its China manufacturing facilities in the prior year. Earnings per share came in marginally below expectations.

two                   Source: 2iQ Research

Looking at insider transaction activity, we think the sharp fall in MTS Systems’ share price has presented a buying opportunity. We say this because since the group’s Q4 results five directors have stepped up to buy shares, including group President and CEO Jeff Graves and President of the Sensors division David Hore. Between them, these insiders have spent nearly $900,000 on stock. Given that these directors are likely to have a good understanding of the company’s future prospects, we see this buying activity as a bullish signal.

Palo Alto Networks Inc (PANW: US)

12-month performance: +26%
Insider activity: Bullish
Buying pattern: Large purchase from Chairman/CEO
Recent news: Disappointing Q1 results

Palo Alto Networks is a leading provider of cybersecurity solutions. Its core offering is a platform that includes advanced firewalls and cloud-based solutions to enhance IT security. The stock is listed on the New York Stock Exchange and currently has a market capitalisation of $22.1 billion.

Palo Alto shares fell from $250 to $220 in late November after the cybersecurity company posted disappointing first-quarter results. While revenue rose 18% in the first quarter, net loss widened to $59.6 million, from $38.3 million a year earlier. The group also advised that due to higher costs and rising competition, second-quarter profits would be below estimates.

three                   Source: 2iQ Research

Examining insider transaction activity, we think it’s interesting that immediately after the recent results and subsequent share price fall, Palo Alto Chairman and CEO Nikesh Arora purchased an additional 25,000 PANW shares, spending $5.5 million on stock. This large purchase suggests that the insider expects the company to be able to successfully navigate its near-term challenges. Considering that a company’s CEO tends to have better insight into that company’s future prospects than anyone else, we think the stock is worth a closer look right now.

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