Insider Buying

2iQ Insider Brief: C&C Group (CCR: LN) Zalando SE (ZAL: GR) Discover Financial Services (DFS: US)

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C&C Group (CCR: LN)

12-month performance: +25%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including interim Executive Chairman
Recent news: CEO announced retirement

C&C Group is a UK beverage company that manufactures, markets and distributes premium branded cider, beer, wine, soft drinks, and bottled water. Its brands include Magners, Bulmers, and Tennent’s, and it also has distribution agreements with the likes of TsingTao and Pabst Blue Ribbon. The company is listed on the London Stock Exchange and currently has a market capitalisation of £1.1 billion.

C&C Group shares have fallen around 10% since mid-January after the company announced the retirement of CEO Stephen Glancey. Glancey was appointed CEO in 2012, and before that, was COO from 2008. The group advised that a search for Glancey’s successor will commence shortly and that Stewart Gilliland has been appointed interim Executive Chairman with immediate effect to ensure continuity of executive leadership. On the same day, the company also stated that trading has been in line with expectations and that it expects to deliver double-digit EPS growth for FY2020.

first 1                       Source: 2iQ Research

Examining insider transaction activity, we think the recent share price pullback has created a buying opportunity. We say this because since 20 January three top-level directors have purchased CCR shares, including interim Executive Chairman Stewart Gilliland who has increased the size of his personal holding by approximately 20%. In our view, this is a bullish signal. With three insiders spending their own money on shares, we think there’s a good chance the stock will rebound.

Zalando SE (ZAL: GR)

12-month performance: +67%
Insider activity: Bullish
Buying pattern: Large purchase from Chair of Supervisory Board
Recent news: Reported a strong Black Friday performance

Zalando is a leading European online fashion platform. Founded in 2008, the retailer has grown significantly in recent years, and today serves customers in 17 countries. The company is listed on the XETRA and currently has a market capitalisation of €11.2 billion.

We last covered Zalando in March last year when it was trading at around €35. At the time, the stock was recovering from a significant sell-off in the second half of 2018 and we pointed out that the group’s largest shareholder, Danish billionaire Anders Holch Povlsen, had just bought €14 million worth of stock – an encouraging sign. Since then, Zalando shares have performed very well, rising to €44 on the back of a number of strong trading updates. As is often the case, the insider purchase was timed well.

second 2                       Source: 2iQ Research


What looks interesting here is that on 16 January, Chair of the Supervisory Board, Cristina Stenbeck, purchased 10,000 Zalando shares at a price of €46.62 per share. We see this as a bullish signal as Stenbeck is likely to have a good understanding of the company’s growth prospects. With the group recently issuing a strong third-quarter update and reporting a large jump in orders during Cyber Week, and the Chair of the Supervisory Board purchasing a significant number of shares, we think the stock has the potential to keep rising.

Discover Financial Services (DFS: US)

12-month performance: +10%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO, CFO and Chief Legal Officer
Recent news: Solid Q4 results

Discover Financial Services is a US financial services company that provides direct banking products and services and payment services through its subsidiaries. The group owns Discover Bank, and also operates the Discover Global Network, which comprises of Discover Network, PULSE, and Diners Club International. The company is listed on the New York Stock Exchange and currently has a market capitalisation of $24.4 billion.

Discover Financial Services shares have pulled back in the last week after a number of brokers cut their price targets for the stock on the back of the company’s fourth-quarter results issued on 24 January. While the results looked solid at face value, with earnings rising 11% year-on-year, investors didn’t like the fact that the group’s charge-off rate climbed to 3.19% from 3.08% a year earlier.

third 3                       Source: 2iQ Research

What’s interesting here is that earlier this week three top directors, including the company’s President/CEO, its CFO, and its Chief Legal Officer, added to their holdings at around the $74 level. This insider transaction activity stands out to us for a few reasons. Firstly, all three of these insiders are top-tier directors. They’re likely to have a good understanding of the company’s future prospects. Secondly, the purchases were substantial. Combined, the three insiders spent roughly $1.6 million on stock. Finally, this is the first time that multiple directors at Discover have purchased stock in over two years. All things considered, we see these insider purchases as a bullish signal.

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