Insider Buying

2iQ Insider Brief: Samhallsbyggnadsbolaget I Norden AB (SBBB: SS) Hengan International Group (1044: HK) RWE AG (RWE: GR)

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Samhallsbyggnadsbolaget I Norden AB (SBBB: SS)

12-month performance: +110%
Insider activity: Bullish
Buying pattern: Large purchases from CEO
Recent news: Good Q3 results

Samhällsbyggnadsbolaget, or SBB for short, is a Swedish property company. Founded in 2016, SBB focuses on rental residential property in Sweden, as well as social infrastructure properties and building rights in the Nordic region. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalisation of SEK 17 billion.

We last covered SBB in early September, when the stock was trading at around SEK 19. At the time, a number of directors had recently purchased shares in the company, which looked bullish to us. Fast forward to today, and SBB now trades for SEK 23 after third-quarter results showed a significant increase in profit, meaning the stock has risen around 20% in just over three months. Following insider capital here would have been a profitable move.

one-1                    Source: 2iQ Research

Looking at recent insider transaction activity, we think the stock has the potential to keep rising. We say this because since the start of the year CEO Ilija Batljan has purchased over two million shares in the company, which suggests he is confident about the future. Given that a company’s CEO tends to have a better understanding of that company’s future prospects than anyone else, we see Batljan’s purchases as bullish.

Hengan International Group (1044: HK)

12-month performance: +5%
Insider activity: Bullish
Buying pattern: Large purchases from CEO
Recent news: Optimism over US/China trade deal

Hengan International Group is an investment holding company that is primarily engaged in the manufacture, distribution, and sale of personal hygiene products in China. The group is China's largest manufacturer of household tissue paper, sanitary napkins, and disposable baby diapers. The company is listed on the Hong Kong Stock Exchange and currently has a market capitalisation of HKD $70.7 billion.

Hengan International Group shares have underperformed since late April. Like many other Hong Kong-listed stocks, Hengan has been hit by economic uncertainty associated with the US/China trade war and the political protests in Hong Kong. Recently, however, the shares have begun to recover on the back of optimism over a US/China trade deal.

due                   Source: 2iQ Research

Examining insider transaction activity, we think it could be a good time to take a closer look at Hengan International Group. We say this because earlier this week, CEO Lin Chit Hui purchased an additional 9.5 million shares in the company, spending over HKD $500,000,000 on stock. This suggests that the insider expects the stock to continue its recovery. Given the size of Hui’s recent purchase, and the fact that he has a solid track record when it comes to timing his purchases, we think Hengan International looks very interesting right now.

RWE AG (RWE: GR)

12-month performance: +36%
Insider activity: Bullish
Buying pattern: Purchases from three members of the supervisory board
Recent news: Raised outlook twice

RWE AG is a supplier of electricity and natural gas across Europe. The group is engaged in the production of lignite and electricity generation from gas, coal, nuclear and renewables, the supply of electricity, gas and other solutions, as well as energy trading and distribution. The company is listed on the XETRA, and currently has a market capitalisation of €17 billion.

We last covered RWE in February 2019 when it was trading at €22. At the time, we noticed that six members of the company’s supervisory board, including Chairman Werner Brandt, had just purchased shares. We saw this pattern of buying as bullish. Since our last report the stock has performed well, climbing approximately 25% to €27.60 – outperforming the DAX – as the company has raised its outlook twice.

tre                   Source: 2iQ Research

What’s interesting here is that this week, members of RWE’s supervisory board have been buying shares again. So far this week, three insiders have added to their holdings, including two of the insiders that purchased stock early last year. This suggests that these insiders expect the stock to continue rising. Given this pattern of buying, we think the outlook for the stock remains favourable.

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