Insider Buying

2iQ Insider Brief: Volvo AB (VOLB: SS) Wyndham Hotels & Resorts (WH: US) Red Rock Resorts (RRR: US)

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Volvo AB (VOLVB: SS) 

12-month performance: +17%
Insider activity: Bullish
Buying pattern: Large purchases from major shareholder and Chairman
Recent news: Lifted FY2019 growth outlook


Volvo AB is the parent company of the Volvo Group – one of the world’s leading manufacturers of trucks, buses, construction equipment, diesel engines and marine and industrial engines. Operating in 190 markets worldwide, the group has production facilities in 18 countries. The stock is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalisation of SEK 287 billion. 

We last covered Volvo in late July after the company lifted its FY2019 growth outlook. At the time, we noted that the company’s main shareholder, Industrivärden, had just purchased USD $85 million worth of Volvo Stock, and that CEO Martin Lundstedt had also added another 10,600 shares to his personal holding. We interpreted this buying activity as a bullish signal. However, since then, the stock has been hit by the escalation in the trade war between the US and China, falling approximately 9%.


Source: 2iQ Research

Looking at insider transaction activity, insiders appear to be taking advantage of the recent share price weakness. Not only did Industrivärden purchase another USD $81 million worth of Volvo shares on 23 August, but Chairman Carl-Henric Svanberg also purchased another USD $3.2 million worth of shares on 27 August for his personal holding, boosting his position by 16%. This buying activity suggests that these insiders are confident about the future, despite the current high levels of economic uncertainty. With that in mind, we think the outlook for Volvo shares remains favourable.


Wyndham Hotels & Resorts (WH: US)

 12-month performance: -11%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO and CFO
Recent news: Good Q2 results


Wyndham Hotels & Resorts is an international hotel and resort company based in the US. Operating as a hotel franchisor, the group has over 9,000 hotels across 80 countries in its portfolio, and its brands include Wyndham, Ramada Encore, and Days Inn. The stock is listed on the New York Stock Exchange and currently has a market capitalisation of $4.9 billion.


Wyndham Hotels & Resorts issued a solid set of results for the second quarter in late July. Revenue increased 23% to $533 million, beating consensus estimates, while adjusted EBITDA rose 27% on the prior-year quarter. However, like many other cyclical stocks, Wyndham’s share price has declined over the last month due to the escalation in the US/China trade war. 


Source: 2iQ Research

Examining insider transaction activity, a number of insiders appear to be capitalising on the recent share price weakness by adding to their personal holdings. Since mid-August, we have observed purchases from CEO Geoffrey Ballotti, CFO David Wyshner, and director Ronald Nelson, who between them have purchased over $1.1 million worth of shares. This is a bullish signal, in our view, as these insiders are likely to have a good understanding of the company’s future prospects. With Ballotti recently stating that management remains “enthusiastic” about the company’s domestic and international growth prospects, and three top-level directors buying stock, we think Wyndham shares have the potential to rebound.


Red Rock Resorts (RRR: US)

 12-month performance: -34%
Insider activity: Bullish
Buying pattern: Large purchases from Chairman
Recent news: Mixed Q2 results


Red Rock Resorts is a leading US gaming, development, and management company that operates over 20 strategically-located casino and entertainment properties. The group has significant presence in Las Vegas, with ten major gaming and entertainment facilities, and ten smaller casinos. The stock is listed on the NASDAQ Global Select Market and currently has a market capitalisation of $2.5 billion.


Red Rock Resorts shares have underperformed since the company released its first-quarter results in late April. Despite the fact that revenue topped the consensus forecast for the fifth straight quarter, and adjusted EBITDA increased 4%, the shares have fallen over 20% since these results. Yet analysts remain bullish on the stock. Of the seven analysts covering the stock, four have Red Rock Resorts as a ‘strong buy’, while the average price target among analysts is $25.85, around 20% higher than the share price today.

RRR_USSource: 2iQ Research

What we think is interesting about Red Rock Resorts is that throughout August, Chairman and CEO Frank J. Fertilla III has purchased a substantial quantity of shares in the company. According to our records, the insider has acquired 1,692,799 shares this month, for a total cost of around $32 million. This suggests that the director – who has significant experience in the hospitality and gaming industries – sees considerable value in the stock at current levels. Given the size of Fertilla’s purchases, and his industry experience, we think shares in Red Rock Resorts are worth a closer look.