12-month performance: -37% Insider activity: Bullish Buying pattern: Purchases from multiple directors including CEO and CFO Recent news: Poor Q2 results
Kindred Group is an online gaming business that owns a wide range of sports betting and casino gaming brands including Unibet, 32Red, StanJames.com, Maria Casino, and Bohemia Casino. Through its brands, the company serves over 25 million customers worldwide. The stock is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalisation of SEK 13.8 billion.
Kindred Group shares fell significantly in late July after the group’s interim report showed that second-quarter pre-tax profit nearly halved due to strong comparatives the year before. However, after hitting a low of SEK 48 in mid-August, the stock has rebounded to SEK 59 over the last two months, ahead of third-quarter results which will be released on 25 October.
Source: 2iQ Research
Looking at insider transaction activity, we think it’s interesting that a number of directors have purchased shares in Kindred Group ahead of the Q3 results. According to our records, eight separate directors have purchased shares in the company since the beginning of October, including the CEO, CFO, CTO, and Chief Strategy Officer. These purchases suggest that management is confident about the upcoming results. Given this pattern of cluster buying, we think the stock could be set to outperform in the near term.
Greggs PLC (GRG: LN)
12-month performance: +62% Insider activity: Bearish Selling pattern: Large sale from CEO Recent news: Underwhelming Q3 results
Greggs is a UK-based food retailer that specialises in bakery and food-on-the-go products. Operating around 2,000 shops across the UK, the group serves millions of customers each week, and its goal is to become customers’ choice for food on-the-go. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £1.8 billion.
While Greggs shares have risen more than 60% over the last year, they have pulled back in recent months on the back of concerns over slowing growth. The group’s latest trading update, issued on 1 October, showed that in the third quarter like-for-like sales rose 7.4%, compared to first-half growth of 10.5%, and the company also advised that it was experiencing pressures on both labour and food input costs.
Source: 2iQ Research
Analysing insider transaction activity, we think that caution is warranted towards Greggs shares right now. We say this because last week CEO Roger Whiteside sold around £1.7 million worth of stock, which could be interpreted as a bearish signal. Of course, there are plenty of legitimate reasons as to why insiders sell shares. However, given that the stock still trades at a relatively high valuation (P/E ratio of 21.4) while the company’s growth appears to be normalising, and that there’s considerable uncertainty in relation to how Brexit will impact the food retailer, we think there’s risk to the downside here given this large insider sale.
CHR Hansen Holdings AS (CHR: DC)
12-month performance: -17% Insider activity: Bullish Buying pattern: Purchases from multiple directors including CEO and Chairman Recent news: Q4 profit missed forecasts
Chr Hansen Holding is a Danish bioscience company that develops natural ingredient solutions for the food, nutritional, pharmaceutical, and agricultural industries. The company’s solutions enable food manufacturers to produce more with less, and also reduce the use of chemicals and other synthetic additives. The stock is listed on the OMX Nordic Exchange Copenhagen and currently has a market capitalisation of DKK 71 billion.
We last covered Chr Hansen in July. At the time, the shares had just taken a hit on the back of the company downgrading its revenue outlook. Yet we noticed that multiple insiders were buying shares and said that the stock may have rebound potential. Fast forward to today, and the company is still struggling to generate momentum. Last week, the group posted net profit for its financial year at €250.2 million, slightly below the consensus estimate of €253.8 million, and said that it expects organic sales growth next year of between 4% and 8%, below long-term guidance of 8% to 10%. Management also said that the group has a ‘cautious’ outlook for 2019/2020, given market challenges.
Source: 2iQ Research
While Chr Hansen is clearly experiencing challenges right now, we think it’s interesting that insiders continue to buy shares. In the last week, we have observed substantial purchases from CEO Mauricio Graber, Chairman Dominique Reiniche, Vice Chairman Jesper Brandgaard, and Independent Director Kristian Villumsen. Between them, they acquired 4,500 shares. In our view, this indicates that these insiders believe that the long-term growth story remains intact and that they continue to expect the share price to rebound. With that in mind, we think the shares could be of interest to contrarian investors right now.
Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.
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