Remy Cointreau SA (RCO: FP)
12-month performance: -1%
Insider activity: Bullish
Buying pattern: Large put option sale by insider
Recent news: Suspended guidance due to coronavirus
Remy Cointreau is a French alcoholic beverages company. The group specialises in cognacs, liqueurs, and champagne, and its brands include Remy Martin, Louis XIII, and Cointreau. The company is listed on the Euronext - Paris and currently has a market capitalisation of €5.2 billion.
Like the rest of the alcoholic beverages sector, Remy Cointreau is going to be affected by the coronavirus. As early as late January, the company advised that it was concerned about the potential impact of the outbreak, as China is a major growth engine for the group. However, if the Covid-19 outbreak follows a similar pattern to the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003, the fall in Remy’s earnings – while significant – could be short-lived. During SARS, Remy experienced a near-25% decline in quarterly global cognac sales between April and June 2003, followed by a strong rebound in subsequent quarters.
What stands out to us here is that on 13 March, the Heriard-Dubreuil family sold a large amount of put options (an investor sells a put option when they expect the underlying security to rise) on Remy Cointreau shares through their investment vehicle Orpar SA. This is worth noting because Marc Heriard-Dubreuil is the Chairman of Remy, and there are four other members of the Heriard-Dubreuil family on the board. What this tells us is that insiders expect RCO shares to recover from their recent fall. Given this insider activity, and the fact that the stock’s valuation is at 10-year lows, we think the risk/reward proposition here looks attractive right now.