Insider Buying

2iQ Insider Brief: Bang&Olufsen (BO:DC) Transcontinental (TCL/A:CN) HEICO (HEI:US)

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Bang & Olufsen AS (BO:DC)

12-month performance: -5%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors incl. CEO
Recent news: Initiated share buyback

Founded in 1925, Bang & Olufsen is a Danish luxury lifestyle company that designs, develops and markets high-end audio and video equipment including music systems, loudspeakers, TVs and multimedia products. Operating in over 70 markets worldwide, the company’s products are sold in mono-branded stores, multi-branded stores and online. The stock is listed on the NASDAQ Copenhagen and currently has a market capitalization of DKK 5.6 billion.

After a strong run between January 2015 and January 2018 in which Bang & Olufsen shares rose more than 400%, the shares have lost their upward momentum this year and pulled back from a high of DKK 190 in January to trade near DKK 130 today. Yet financial results have continued to look solid and the group recently stated that its outlook for 2018/19 remains unchanged. With the company initiating a share buyback programme for an amount up to DKK 485 million in September, could now be a good time to buy the stock?


Source: 2iQ Research

Analysis of insider transaction activity here reveals a bullish outlook. Since the beginning of October, we have seen purchases from three key insiders, including President & CEO Henrik Clausen who recently acquired 2,650 shares at a price of DKK 124.57. Clausen, who has been President & CEO since mid-2016, has a solid track record of timing his purchases well, as demonstrated by his 2iQ Short-Term Trading IQ of 115. As such, we believe BO is a stock to watch closely as we think there could be potential for a share price rebound.

Transcontinental Inc (TCL/A:CN)

12-month performance: -17%
Insider activity: Bullish
Buying pattern: Multiple directors buying including CFO
Recent news: Q3 results missed expectations

Transcontinental Inc is a Canadian company that specializes in printing, packaging and digital media. The group is Canada’s largest printer and one of the largest printers in North America. Listed on the Toronto Stock Exchange, the company currently has a market capitalization of CAD $1.9 billion.

Shares in Transcontinental have fallen sharply since early September after the company announced Q3 earnings that were well below analysts’ estimates. With costs related to its recent acquisition of the Coveris Americas packaging business impacting profitability, net earnings fell 61% on last year’s third quarter, and adjusted earnings per share came in at 59 cents, versus analysts’ estimates of 70 cents. Multiple brokers have downgraded their price targets for the stock since the results, which won’t have helped sentiment. Yet with the stock down nearly 30% in just over a month, is there potential for a rebound?


Source: 2iQ Research

Insider transaction activity at Transcontinental actually looks quite bullish. Since the shares have declined recently, five separate directors have purchased stock, including CFO Donald LeCavalier who made his first purchase in the company at a price of CAD $22.97. Given that multiple key insiders have been buying Transcontinental shares while they have been trading at a lower valuation, we think the shares could be worth watching for a rebound in the medium term.

HEICO Corporation (HEI:US)

12-month performance: +52%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including Chairman/CEO & Co-CEO
Recent news: Q3 results beat expectations

Headquartered in Fort Lauderdale, HEICO Corporation is a fast-growing aerospace and electronics company focused on niche markets. Specializing in the manufacture of high-reliability parts and components for aircraft, spacecraft, defense equipment, medical equipment, and telecommunications systems, the group’s customers include most of the world’s airlines, satellite manufacturers, defense equipment producers, medical equipment manufacturers, government agencies and telecommunications equipment suppliers. The stock is listed on the New York Stock Exchange and currently has a market capitalization of $10.2 billion.

Shares in HEICO have had an excellent run over the last two years, climbing from around $34 to $85, a rise of approximately 150%. Gains have been driven by strong financial performances, with the group beating analysts’ profit estimates for the last eight consecutive quarters. Most recently, Q3 revenue and profit figures both beat market expectations, with the group raising its full-year sales and operating margin forecasts. Clearly, the company has strong momentum at present. Are further share price gains possible then?


Source: 2iQ Research

Analysis of insider transaction activity here reveals a very bullish trading pattern. In recent weeks, we have seen nine different top-level directors all spend more than $100,000 on company shares, including Chairman & CEO Laurans Mendelson and Co-CEO Eric Mendelson. We view this pattern of ‘cluster’ buying as a positive signal, as it indicates that the outlook for the company is buoyant. With so many key insiders currently investing in company stock, we think HEICO could have potential to deliver further gains. 


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