Imperial Brands is a fast-moving consumer goods company with a tobacco heritage. The group owns a number of cigarette brands including Davidoff, West, and Winston, and also has exposure to next-generation products (NGP) such as vapour and heated tobacco products, and cannabis. The company is listed on the London Stock Exchange and currently has a market capitalisation of £17.5 billion.
Imperial Brands has been out of favour with investors for a while now. There are two main reasons for this. Firstly, the tobacco sector is unpopular at present due to the increasing focus on sustainability. Secondly, Imperial’s results have been disappointing. For example, in an AGM statement on 5 February, the group advised that following the US FDA's ban on certain flavours of cartridge-based vapour devices and weaker-than-expected consumer demand for vapour, it now expects first-half adjusted earnings per share to be down around 10% at constant currency.
Source: 2iQ Research
Looking at insider transaction activity, top-tier directors continue to buy here. For example, on 6 February, the day after the AGM statement, Chairman Therese Esperdy purchased 24,000 American Depositary Shares, spending $577,440 on stock, while CFO Oliver Tant acquired 2,200 ordinary shares, spending just over £40,000 on stock. This comes after a number of other top directors, including Group Strategy Director Amal Pramanik and Group Innovation & Science Director David Newns have made large purchases in recent months. Clearly, insiders at Imperial Brands believe the stock is undervalued. Considering the consistent insider buying here, we believe IMB remains an interesting contrarian play.