Rheinmetall AG (RHM: GR)
12-month performance: -40%
Insider activity: Bullish
Buying pattern: Purchases from multiple insiders including CFO and Chairmen
Recent news: Broker upgrades
Rheinmetall is a German company that specialises in security and mobility solutions. The group’s Defence sector is Europe’s foremost supplier of army technology, while its Automotive sector is a first-tier supplier of modules and systems to the automotive industry. The company is listed on the XETRA and currently has a market capitalisation of €2.6bn.
While many companies have received broker downgrades in the wake of the coronavirus outbreak, Rheinmetall has actually seen a number of upgrades. On 20th March, for example, analysts at Deutsche Bank upgraded RHM from ‘hold’ to ‘buy’, stating that the stock’s recent underperformance was unjustified given the company's solid liquidity position. Similarly, on 23rd March, analysts at HSBC upgraded the stock from ‘hold’ to ‘buy’, stating that the group’s security and mobility solutions defence unit should bring it through the COVID-19 crisis, as government customers are likely to stick to existing contracts and projects in uncertain times.
Looking at insider transaction activity here, we think it’s interesting that a number of insiders have purchased RHM shares recently. Since mid-March, both Chairman of the Supervisory Board Ulrich Grillo and Chairman of the Executive Board Armin Papperger have bought shares, as has CFO Helmut Merch, and two members of the Supervisory Board. In our view, this pattern of buying is quite bullish. With the company recently stating that it is benefiting from a “super cycle” in defence technology, and multiple insiders buying, we think the medium-term risk/reward proposition here is attractive.