2iQ Insider Brief: KAZ:LN, HCG:CN, APLE:US

Robert Hable 3 September 2018

KAZ Minerals PLC (KAZ: LN)

12-month performance: -42%
Insider activity: Bullish
Buying pattern: Multiple director purchases including CEO
Recent news: Announced the acquisition of a Russian copper project

KAZ Minerals is a mining company that is focused on the mining of copper in Kazakhstan. The company is one of the largest copper producers in Kazakhstan and also one of the largest globally. Headquartered in London, the group is listed on the London Stock Exchange and currently has a market capitalization of £2.2 billion.

While KAZ Minerals shares have performed well over a two-year time horizon, gaining approximately 180%, the shares have fallen sharply over the last three months, plummeting over 50%. Investors have dumped the stock after the company announced that it was planning to spend $900 million on the acquisition of an undeveloped Russian copper project. After such a dramatic share price fall, could KAZ Minerals shares now be worth a closer look?

KAZ Minerals

Source: 2iQ Research

Analysis of recent insider transaction activity certainly reveals an interesting picture. Since mid-August, we have seen seven different directors purchase shares in KAZ Minerals, which is a bullish signal. Furthermore, CEO Andrew Southam has made two purchases in recent weeks, spending just under £80,000 to acquire 16,455 shares in the company, which is another bullish indicator. These purchases suggest that there is a disconnect between investor sentiment and management’s confidence in the outlook for the company. As such, we believe the stock could be worth watching for a rebound.

Home Capital Group (HCG: CN)

12-month performance: +8%
Insider activity: Bullish
Buying pattern: Purchases from CEO & CFO
Recent news: Q2 earnings missed expectations

Home Capital Group is a Canadian holding company which through its subsidiary Home Trust Company provides Canadians with a range of credit products including credit cards, mortgages and deposit services. The group is listed on the Toronto Stock Exchange and has a market capitalization of CAD $1.2 billion.

Home Capital Group shares have declined recently after the group reported second-quarter earnings on 13 August that missed analysts’ expectations. Diluted earnings per share came in at 37 cents, an improvement on last year’s loss of $1.73, but short of the 38 cents consensus estimate. The stock fell nearly 10% on the update and CIBC cut its price target for HCG to CAD $16 from CAD $17 shortly after. Should investors be concerned about the group’s future prospects? 

HOME CAPITAL GROUP

Source: 2iQ Research

Insider transaction activity here suggests that management is confident about the future. Since the recent Q2 results, four different directors have purchased shares in the company, including CEO Yousry Bissada, who spent CAD $145,800 to increase his holding by 37%, and CFO Bradley William Kotush who spent CAD $146,600 to up his position size by 61%. There was also a sizeable purchase from non-executive director Paul Derksen on 16 August who spent CAD $414,000 on 30,000 shares. With these purchases in mind, we believe Home Capital Group could be an interesting stock to watch going forward.

Apple Hospitality REIT (APLE: US)

12-month performance: -1%
Insider activity: Bullish
Buying pattern: Multiple director purchases including CEO
Recent news: Poor Q2 results

Apple Hospitality REIT is a hospitality-focused real estate investment trust that is listed on the New York Stock Exchange. With a portfolio that consists of 241 hotels across the Hilton and Marriott hotel brands, the REIT owns one of the largest portfolios of upscale, select-service hotels in the United States.

After trading above $20 in late January, APLE shares have since declined and currently trade below $18. Second-quarter results, released on 6 August, did little to improve sentiment as the results showed that net income fell 23% on the same period last year. At the current share price, the prospective dividend yield on APLE is 6.7%. Given that high yields can sometimes signal trouble, should investors be concerned?

Apple Hospitality REIT

Source: 2iQ Research

An analysis of insider transaction activity here actually reveals quite a bullish setup. Since the recent Q2 results, we have seen five different directors purchase shares in the REIT, including President/CEO Justin Knight, Executive Chairman Glade Knight and Chief Legal Officer David Buckley. With top-level directors reaching into their pockets to buy stock, we think APLE could warrant a closer look at its current valuation.

 

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