12-month performance: -20% Insider activity: Bullish Buying pattern: Large purchases from Chairman Recent news: Q3 results beat expectations
Krones is a German company that specialises in the design and manufacturing of processing, packaging, and bottling machines and systems. Operating over 100 sites worldwide, the group serves breweries, soft drink manufacturers, dairies, and wine and spirits producers. The stock is listed on the XETRA and currently has a market capitalisation of €2 billion.
Krones shares fell sharply in July after the group issued a profit warning. Blaming increased raw material costs, the company said that 2019 earnings before tax (EBT) would be significantly below expectations and cut its EBT margin target from 6% to 3%. This saw Krones’ share price fall from €67 to €53. However, recently, the stock has risen back above €60 after the group’s third-quarter results beat expectations and the company announced restructuring measures.
What looks interesting to us here is that in the last two weeks Krones Chairman Volker Kronseder – who has been with Krones since 1981 – has purchased a significant number of shares in the company. According to our records, the top-level director purchased 168,000 shares between 6 November and 12 November, spending over €10 million on stock. This suggests that the insider is confident about the future and expects the shares to recover. With that in mind, we believe the stock could be worth a closer look right now.
Rank Group PLC (RNK: LN)
12-month performance: +45% Insider activity: Bullish Buying pattern: Purchases from CEO and CFO Recent news: Completed the acquisition of Stride Gaming
Rank Group is a gaming company that operates in the UK, Spain, and Belgium. Founded in 1937, the group is the largest casino operator in the UK, and is also a key player in the bingo industry. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £860 million.
Rank Group shares had a strong run between mid-August and late October, rising around 60%. The reason the stock performed so well during this period was that the company completed the acquisition of Stride Gaming – a leading online soft gaming operator – and also issued strong third-quarter results in which like-for-like revenue was up 10%. In addition, analysts upgraded their FY2020 and FY2021 earnings forecasts significantly. However, after a 60% gain in less than three months, the stock was always likely to be prone to a pullback, and that’s what we’ve seen in recent weeks, with the share price falling from 245p to around 220p.
Looking at insider transaction activity, we think it’s interesting that both CEO John O’Reilly and CFO Bill Floydd have taken advantage of the recent share price pullback and added to their holdings. According to our records, on 11 November, Floydd purchased 25,000 shares at a share price of £2.16, while on 12 November, O’Reilly purchased 92,500 shares at £2.16 – boosting his holding by nearly 60%. We see these insider purchases as a bullish signal. With the company recently completing a major acquisition that will boost its digital presence significantly, and two top directors purchasing shares, we think the outlook for the stock is favourable.
Powerlong Real Estate Holdings (1238: HK)
12-month performance: +46% Insider activity: Bullish Buying pattern: Large purchases from CEO Recent news: Completed capital raising
Powerlong Real Estate Holdings is a Chinese real estate company. The company specialises in the development of commercial real estate projects, and to date, has completed around 100 projects in over 40 cities. The stock is listed on the Kong Hong Stock Exchange and currently has a market capitalisation of HKD $18.7 billion.
After a strong run between January and mid-October, Powerlong Real Estate Holdings shares have fallen nearly 25% in the last month. The reason the shares have declined is that on 14 October, the company raised HKD $792 million to fund property investment and development through the sale of 146.6 million shares at HKD $5.40 each. This price was at the lower end of guidance and represented a discount of 8.6% to the previous closing price.
Looking at insider transaction activity, we think the recent share price pullback has created a buying opportunity. We say this because in the last week Powerlong CEO Wa Fong Hoi – who is the son of Chairman Kin Hong Hoi – has purchased 5.55 million shares, spending nearly HKD $26 million (around USD $3.3 million) on stock. This suggests that the insider is confident about the future and believes the shares offer value at current levels. Given this substantial insider purchase, we believe the stock offers an attractive risk/reward proposition right now.
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