2iQ Insider Brief: HMB:SS, FIE:GR, PSM:GR

Patrick Hable 11 July 2018

Hennes & Mauritz AB (HMB: SS)

12-month performance: -33%
Insider activity: Bullish
Buying pattern: Large Chairman purchase
Recent news: Q2 sales rose 1%, missing expectations

Hennes & Mauritz (H&M) is a Swedish multinational clothing retail company. The group owns nearly 5,000 stores across 69 markets and also has a presence online.

Over the last year, H&M shares have performed poorly, falling over 30% as the market has become concerned that the fashion group’s days as a growth stock are over. In recent years, H&M has struggled to adapt its business model to a world in which a strong online presence is now paramount and physical shops are less important. After sales growth of 18% in FY2014 and 19% in FY2015, the group delivered sales growth of just 6% and 4% in FY2016 and FY2017 respectively.

Furthermore, in March, the retailer reported a 44% decline in Q1 net profit, after being forced to hold substantial clearance sales to address stock imbalances. Analysts remain bearish on the stock, with only one analyst out of the 29 covering the stock rating it as a ‘buy,’ according to data from Thomson Reuters. The stock has also had a significant level of short interest recently.

 

Hennes & Mauritz AB

Yet, after such a large decline in the share price, is now the time for contrarian investors to look at the stock? Analysis of insider transaction activity suggests that it may be. Recently, Chairman Stefan Persson has been buying up a considerable amount of stock while the shares have been cheap. Between April and July, the key insider registered over 30 sizeable transactions, with the value of his purchases totaling over USD $1 billion. Such a large purchase from a key insider is a bullish signal. The shares have already bounced 15% from their March lows, but we think they continue to look interesting.  

Fielmann AG (FIE: GR)

12-month performance: -12%
Insider activity: Bullish
Buying pattern: Large Chairman purchase
Recent news: No earnings growth expected for 2018

Fielmann AG is a German optics group that focuses on retail eyewear. The company is a market leader in Germany, selling almost every second pair of glasses, and is Europe’s largest optical chain.

Fielmann shares fell sharply in late June after the group announced that it expects earnings before taxes in 2018 to be on par with 2017 numbers. The company advised that although it was anticipating group-wide sales to grow by 2% for the full year, profits would be impacted by higher personnel costs, investment in digital capabilities and currency movements. Investors were unimpressed with the update, with the shares falling from around €68 to €55. Has the drop resulted in a buying opportunity?

 

Fielmann AG

One thing we’ve noticed in relation to Fielmann is that since the drop in the share price, several key insiders have stepped in to buy the stock, including Chairman of the Supervisory Board Mark Binz, who recently upped his holding in the company by 16%. This is a bullish signal, and it’s worth pointing out that Binz has a good track record of timing his purchases well, as his ‘long-term trading IQ’ is higher than average, at 105. As a result, we believe Fielmann shares could be worth watching for a potential rebound. 

ProSiebenSat.1 Media SE (PSM: GR)

12-month performance: -35%
Insider activity: Bullish
Buying pattern: Large Chairman purchase
Recent news: Short sellers have targeted the stock

ProSiebenSat.1 is a German entertainment company that operates free-to-air commercial TV channels and pay TV channels. Every day, 45 million households across Germany, Austria and Switzerland watch the group’s 14 free and pay TV channels.

Over the last 12 months, PSM shares have performed poorly, falling approx. 35%. The group has released a number of profit warnings in this time, as viewing habits have changed and companies have cut advertising expenditure. The broadcaster has also failed to sell its digital and M&A strategies to investors.

 

Several short-sellers have targeted PSM over the last year. In December, Swedish hedge fund Bodenholm Capital disclosed a short position, arguing that the group was losing market share. And in March, short-seller Viceroy Research put a valuation of €7.51 on the stock, claiming that its accounting methods were questionable. Old Mutual Global Investors and AQR Capital Management have also shorted the shares.

PROSIEBENSAT.1 MEDIA SE

However, an analysis of insider transaction activity suggests that the outlook for PSM may not actually be as bad as some fear. In late June, five different directors purchased shares in PSM, including Chairman of the Management Board Maximilian Conze and Chairman of the Supervisory Board Werner Brandt. Conze’s purchase is of particular note, as the value of the transaction was $1.8 million - a large purchase. It’s also worth mentioning that in the last month, we have seen one short-seller, AQR Capital Management, reduce its short position by almost half. Weighing up the recent director purchases and AQR’s reduction in its short position, we believe that ProSiebenSat.1 shares may now be worth a closer look.

 

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