2iQ Insider Brief: Zooplus AG and a CEO worth following closely

Kaloyan Kolev 9 October 2018

 

Zooplus CEO Cornelius Patt: An insider worth following closely

While director purchases and sales can often provide investors with valuable trading signals, some directors naturally have better timing than others when it comes to investing their own money. 

If a director has an outstanding track record of buying and selling shares at the right time and generating regular profits, it can be worth following that director’s trading activity closely, with a view to potentially replicating the trading strategy.

With that in mind, today we want to highlight a fantastic example of well-timed insider transaction activity. Here’s a look at a company CEO that has an excellent track record of timing his purchases and sales well.

Top timing

The top-level insider we are looking at is Cornelius Patt, who is CEO of Zooplus AG – a German pet supplies retailer which markets a vast selection of products through its online stores.

Patt, who has been CEO of the company since 2006, has an excellent track record of both buying shares and selling shares at the right time, and has generated significant profits in recent years from his well-timed trades. Chart 1 below shows his recent trading activity.

Chart 1: Cornelius Patt's excellent track record

Cornelius Patt Track Record Source: 2iQ

As you can see from the chart, Patt has a good understanding of when Zooplus’ share price is overbought, and when it is oversold. Shares in Zooplus tend to be prone to both periods of strong upward momentum and also sharp pullbacks, and Patt is able to capitalize on this volatility by buying low and selling high.

Trading pattern

What’s also interesting about Patt is his trading pattern. While the CEO holds a large number of Zooplus shares, it appears that he allocates a small proportion of these shares for short-to medium-term trading activity. And when he trades, he makes a number of transactions over a period of several days to average out the price. A detailed breakdown of his recent trading activity is shown in Chart 2. 

Chart 2: Cornelius Patt: transaction details

Transaction Details2

Source: 2iQ

As you can see, there's a clear pattern to his trades.

Next move

So, what is Patt’s next move likely to be?

Well, looking at the chart, Zooplus’ share price has pulled back quite significantly in recent months. After trading above €190 in mid-May (Patt sold at €181.67 on 23 May), the stock has fallen by around 20% to now trade at €146.

Chart 3: Zooplus AG's performance

Performance Zooplus

Source: 2iQ

As a result, considering Patt’s past trading activity, we think there’s a reasonable chance he may be interested in buying more stock soon, especially if the share price continues to fall and hits the €140 mark again. We say this for three main reasons:

First, analysis of his past trading activity reveals that Patt bought 3,500 shares last October at a price of €139.49 per share. This indicates that the CEO previously thought that this price offered value.

Second, further analysis reveals that two other top-level Zooplus directors have been purchasing stock recently, with both Chairman Christian Stahl and CMO Andrea Skersies buying shares in Zooplus in the last two weeks. Stahl purchased 1,500 shares at a price of €150 while Skersies bought 1,000 shares at €146.30. It’s quite common to see multiple directors purchasing shares within a short period of time, so it would not surprise us if Patt bought as well.

Third, recent half-year results were robust, with sales growing 24% to €643 million in the first half of the year, and the group confirming its full-year sales growth forecast of 21%-23%.

So, the company appears to have momentum at present, yet the share price has fallen recently. As such, we think that Patt may be looking at the current share price as an opportunity to go long again.

Bullish indicator

If Patt does purchase shares in Zooplus in the near future, we would interpret this as a bullish signal, given his trading history.

Of course, following a director’s trading activity will not guarantee a profit, yet with Patt’s track record of successfully buying and selling shares in Zooplus at the right time, we believe a trading strategy that replicates his trading activity offers a compelling risk/reward profile.

 

Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.