Insider Buying

2iQ Insider Brief: SPI:LN, STX:US, ABN:NA

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Spire Healthcare (SPI:LN)

12-month performance: -52%
Insider activity: Bullish
Buying pattern: Large purchases from CEO and Chairman
Recent news: Profit warning in early August

Founded in 2007, Spire Healthcare is an independent UK hospital group that operates 39 hospitals and 11 clinics. The group provides diagnostics, in-patient, daycase and out-patient care and serves a patient mix that consists of National Health Service (NHS), self-pay and private medical insurance patients. The group also owns and operates a sports medicine, physiotherapy and rehabilitation brand – Perform.

Spire shares have not performed well over the last 12 months as the company has released multiple profit warnings. A recent trading update, released on 6 August, saw the shares plummet from 247p to 160p after the group revealed that EBITDA for 2018 is expected to be material lower than for 2017. However, Chief Executive Officer Justin Ash also advised that revenue is expected to recover through the second half of 2018 and in 2019 and that the group remains confident in its medium to long-term prospects. After a 52% share price drop over the last year, could the stock have long-term recovery play potential?

Spire Healthcare Performance

Source: 2iQ Research

Interestingly, both Ash and Chairman Garry Watts have both stumped up capital to buy Spire stock since the trading update, buying 125,000 and 100,000 shares respectively. Ash’s purchase in particular is worth noting as it boosted his holding in the company by over 50%. While sentiment towards the stock is poor at present, the two key insiders clearly believe that the shares offer long-term value at current levels.

Seagate Technology (STX: US)

12-month performance: +65%
Insider activity: Bullish
Buying pattern: Large purchases from activist investor
Recent news: Stock downgraded to "sell" by Goldman Sachs

Seagate Technology is a provider of electronic data storage technology and solutions. Headquartered in Dublin since 2010, the company manufactures a broad range of hard disk drives (HDD), solid state drives, solid state hybrid drives, and storage subsystems and sells its products to original equipment manufacturers, distributor and retailers. The stock is listed on the NASDAQ.

Shares in Seagate have enjoyed a strong run over the past 12 months, rising 65%. Yet the stock has experienced weakness in August after analysts at Goldman Sachs downgraded the company from ‘neutral’ to ‘sell’ recently, stating that the hard disk drive business is vulnerable to a potential slowdown and that 2018 will be the cyclical peak for HDD prices. Goldman’s price target for the stock is USD $44, around 17% below the current share price.

Seagate PerformanceSource: 2iQ Research

However, while Goldman may be bearish on Seagate Technology, investors at ValueAct Capital Management – the activist fund run by Jeff Ubben – clearly see potential in the stock. Indeed, in recent weeks, ValueAct has been building up a considerable stake in Seagate and since 31 July has made six separate purchases in the data storage company, totaling nearly $160 million. The company also made another sizeable purchase back in early June for $51.6 million. All up, ValueAct’s purchases amount to around 9% of Seagate’s equity capital, meaning that the activist investor is now the third-largest shareholder in the company. In an unorthodox twist, it appears that Seagate actually approached ValueAct about becoming a significant shareholder, with Seagate CEO Steve Luczo recently commenting:

“Seagate approached ValueAct to execute this transaction and become an investor in our company, given their commitment to and success in creating long-term value for the companies in which they invest.”

As part of the stock purchase, ValueAct will receive an ‘observer board’ position. Given these recent developments, we believe Seagate Technology is a stock to watch closely going forward.

ABN Amro (ABN:NA)

12-month performance: -9%
Insider activity: Bullish
Buying pattern: Large purchases from CEO & CFO
Recent news: ABN hints that extra shareholder rewards are a possibility

Headquartered in Amsterdam, ABN Amro Group NV is a Netherlands-based financial institution. The group provides retail banking, private banking, commercial banking and corporate and institutional banking services to customers across Europe, North America, South America, Australia and Asia.

Shares in ABN Amro have had a volatile year, rising as high as €28 in January, before falling below €22 in mid-July. Over 12 months, the stock is currently down around 9%.

ABN Amro PerformanceSource: 2iQ Research

However, the shares did bounce higher recently, registering their largest gain in eight months, after the bank announced plans to reduce its international corporate banking activities and advised that there could be a possibility of more rewards to come for investors as a result of capital buffers rising. When asked about higher dividends or share buybacks, Chief Executive Kees van Dijkhuizen replied:

"We feel more confident now than we did three months ago. We will pay out 50 percent of our sustainable profit as promised, and we'll decide on possible extra shareholder rewards at the end of the year.

Looking at recent insider transaction activity, it appears that van Dijkhuizen is confident about the bank’s prospects. On 8 August, the same day as the announcement above, the key insider bought 10,000 shares for a consideration of USD $282,182, increasing his shareholding by nearly 80%. And he wasn’t the only director to buy ABN stock that day, as CFO Clifford Abrahams also bought his first parcel of shares in the company for a sizeable USD $350,407. When both a CEO and CFO are buying large quantities of stock in a company, it’s generally a bullish signal. As such, ABN Amro could be set for a period of outperformance.

 

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