Insider Buying

2iQ Insider Brief: Kirkland Lake Gold Ltd (KL: CN) Upwork Inc. (UPWK: US) Global Fashion Group SA (GFG: GR)

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Kirkland Lake Gold Ltd (KL: CN)

12-month performance: +95%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including President/CEO
Recent news: Announced a major takeover

Kirkland Lake Gold is a Canadian mid-tier gold mining company. Operating in Canada and Australia, the group has five producing gold mines, which together, produced 723,701 ounces of gold last year. The stock is listed on the Toronto Stock Exchange, the Australian Stock Exchange, and the New York Stock Exchange and currently has a market capitalisation of CAD $11.7 billion.

Kirkland Lake Gold shares have performed well over the last year on the back of the rising price of gold, which has pushed revenues and profits up substantially. However, in the last week, the stock has pulled back significantly after the company announced that it is planning to buy smaller rival Detour Gold for CAD $4.9 billion in an all-stock deal. Clearly, the market doesn’t like the deal.

first-1                     Source: 2iQ Research

Looking at insider transaction activity, we think investors may have overreacted to the news of the Detour Gold deal. We say this because since the deal was announced five separate directors including President/CEO Anthony Makuch have purchased shares in the company, spending a total of around CAD $800,000 on stock. This suggests that these insiders believe the deal will add value. With that in mind, we think the stock has the potential to rebound.

Upwork Inc. (UPWK: US)

12-month performance: -41%
Insider activity: Bearish
Selling pattern: Large sales from investment company represented in the board
Recent news: Lowered full-year guidance

Upwork is an online company that operates an employment marketplace. Through its platform, it enables businesses to hire highly-skilled freelancers from a number of industries. The stock is listed on the NASDAQ Global Select Market and currently has a market capitalisation of $1.25 billion.

Upwork shares fell sharply last month after the company provided softer-than-expected guidance for the fourth quarter and lowered its full-year profit guidance. While the group reported revenue growth of 23% for the third quarter, it advised that fourth quarter revenue is expected to be between $79 million and $79.5 million – below the consensus forecast of $82.3 million. It also said that due to increased investment in sales, full-year adjusted EBITDA is expected to be between 1% and 1.5% of revenue, lower than previous guidance of between 1% and 2% of revenue.

secondo                    Source: 2iQ Research

Analysing insider transaction activity, we think caution is warranted towards Upwork shares at present. Not only has there been no insider buying in recent months, but in November, SG Growth Partners I – an investment vehicle managed by private equity firm Stripes Group – sold over $7.5 million worth of Upwork stock. This is slightly concerning as Stripes Group Managing Partner Daniel Marriott is on the board at Upwork. Given this insider selling, and the company’s recent profit warning, we think the stock is best avoided right now.

Global Fashion Group SA (GFG: GR)

12-month performance: N/A
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including Co-CEOs and Chair
Recent news: Strong Q3 results

Global Fashion Group is an online fashion retailer that is focused on consumers in the emerging markets. Operating through four websites: The Iconic, Zalora, Dafiti, and Iamoda, the group is active across the Asia Pacific, Latin America, and the Commonwealth of Independent States. The stock is listed on the XETRA and currently has a market capitalisation of €430 million.

Global Fashion Group shares have underperformed since the group’s Initial Public Offering (IPO) in late June, despite the fact that the company has continued to grow. In August, the group advised that revenue for the first half of the year was up 12% on the same period last year, while in November, it said that third-quarter revenue was up 18.7% on last year.

thirdo                    Source: 2iQ Research

Examining insider transaction activity, we think Global Fashion Group’s recent share price weakness has created a buying opportunity. We say this because in the last week we have observed purchases from Chair Cynthia Gordon as well as Co-CEOs Patrick Schmidt and Christoph Barchewitz. Together, these top-level directors have acquired 131,859 shares. Given that these insiders are likely to have a good understanding of the company’s growth potential, we see these purchases as a bullish signal.