2iQ Insider Brief: CTEC:LN, HL/:LN, AEIN:GR

Robert Hable 17 October 2018

Convatec Group PLC (CTEC: LN)

12-month performance: -27%
Insider activity: Bullish
Buying pattern: Purchase from CFO after share price drop
Recent news: Profit warning

Convatec Group is a medical product and technology company that focuses on therapies for the management of chronic conditions. Operating in over 100 countries, the group has strong market positions in advanced wound care, ostomy care, continence and critical care, and infusion devices. The stock is listed on the London Stock Exchange and currently has a market capitalization of £3.0 billion.

Convatec shares fell by over 30% on Monday, after the group released a profit warning and advised that CEO Paul Maroviec had decided to retire and would be stepping down with immediate effect. Revising its full-year expectations guidance for both organic revenue growth and adjusted EBIT margin, the group stated that a change in inventory policy by its largest customer in its Infusion Devices franchise is expected to negatively impact Q4 revenue by $18 million - $23 million. Consequently, the company now expects full-year organic revenue growth of between 0% and 1%, down from previous guidance of between 2.5% and 3%. Naturally, the market was unimpressed with this update. Yet could the dramatic 30% share price fall have created a buying opportunity?

Convatec Performance

Source: 2iQ Research

One key insider who clearly sees value after the share price drop is CFO Frank Schulkes, who took the opportunity on Monday to acquire an extra 65,000 shares at a price of £1.50 per share. Given that a company’s CFO often has the best understanding of that company’s outlook, we see this as a bullish signal. It’s also worth noting that CFO Schulkes has a 2iQ Short-Term Trading IQ of a high 113, which means he has a good track record of timing his short-term trades well. As such, we think this is a stock to watch closely going forward after the recent share price drop.

Hargreaves Lansdown PLC (HL/:LN)

12-month performance: +17%
Insider activity: Bullish
Buying pattern: Purchase from Non-Executive Chair after recent share price drop
Recent news: Solid trading statement

Headquartered in Bristol, UK, Hargreaves Lansdown is a financial services company that operates an investment platform for private investors. Offering a vast range of funds, ETFs and stocks on its platform, the group currently has assets under administration (AUA) of approximately £90 billion. A constituent of the FTSE 100 index, the stock is listed on the London Stock Exchange and currently has a market capitalization of £8.4 billion.

Hargreaves Lansdown shares have been hit hard by the recent market sell-off, falling from around £22.60 to £18 in the space of just a few weeks. When you consider that the stock generally trades on a very high valuation multiple, this kind of share price fall is not totally unexpected given recent volatility. However, with the group recently advising that revenue for the three months to 30 September rose 16% and that it signed up 29,000 new clients during the three-month period, could the share price drop have presented an attractive entry point?

Hargreaves Lansdown performance

Source: 2iQ Research

One top-tier director that appears to see value after the recent share price fall is Non-Executive Chairwoman Deanna Oppenheimer, who last week took the opportunity to purchase 10,000 Hargreaves Lansdown American depository receipts (ADRs) for a net consideration of USD $495,000. This is her second purchase in the space of around four months, and boosts her holding from 5,000 ADRs to 15,000 ADRs. Given that Oppenheimer is likely to have a firm grasp of Hargreaves’ future prospects as Chairwoman, we see this trade as a bullish signal.

Allgeier SE (AEIN: GR)

12-month performance: +44%
Insider activity: Bullish
Buying pattern: Consistent purchases from Chairman
Recent news: Strong H1 results

Allgeier SE is a German information technology (IT) specialist that focuses on digital transformation. Serving both large-scale global companies as well as innovative medium-size businesses, the group offers its customers an extensive range of solutions and services, covering the entire IT service spectrum. A small-cap company, the stock is listed on the Frankfurt Stock Exchange and currently has a market capitalization of €301 million.

Shares in Allgeier have enjoyed a strong run over the last two years – like many other technology-based stocks – rising from around €17 in October 2016 to over €35 in September this year. However, the stock has not been immune to the recent market sell-off, and has pulled back by around 13% over the last month. Given that the company appears to have significant momentum at present with H1 revenue rising 20% and adjusted group EBITDA surging 114%, could the recent dip have provided a good buying opportunity?

Allgeier performance

Source: 2iQ Research

Analysis of recent insider transaction activity here reveals that at least one key insider sees value after the recent share price decline and that is Chairman Detlef Dinsel. Since the beginning of October, the top-level director has purchased 11,000 shares in three tranches, for a total consideration of just under €340,000. This is not the first time that Dinsel has purchased shares in Allgeier this year. In May and June, he purchased another 30,000 shares over eight separate transactions. Clearly, Dinsel is confident about Allgeier’s future. Given that as Chairman, Dinsel is likely to have strong insight into the company’s prospects, we view his trades as a bullish signal. As such, we think the stock could have potential for future gains. 

 

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