If a CEO is buying a large amount of company stock, investors should take note. These insiders tend to be way ahead of analysts and portfolio managers when it comes to the performance of their companies and their stock purchases can provide valuable trading signals.
In this report, we are going to highlight a large CEO purchase at Gannett Co Inc (GCI:US). Gannett is a subscription-led and digitally-focused media and marketing solutions company. Its portfolio includes USA TODAY, hundreds of local media outlets across the US, and Newsquest, which operates 120 local media brands in the UK. It’s listed on the New York Stock Exchange and currently has a market cap of $363.5 million.
Insider buying at Gannett
Our data shows that on August 8, Chairman and CEO Mike Reed bought 500,000 shares at a price of $2.44 per share. This trade cost the insider $1.2 million and increased his holding to 1.836 million shares.
Mr. Reed has significant experience in the media industry. He has served as CEO at Gannett since November 2013 and before this was CEO of GateHouse Media between 2006 and 2013. Prior to this, he served as President and CEO of Community Newspaper Holdings. Given his experience, he is likely to have a good understanding of his company’s prospects.
What stands out here is that Mr. Reed has made a substantial purchase and increased the size of his holding by nearly 40%. This suggests that he is very confident the stock is set to move higher.
Cost reduction program
Gannett is suffering from both a slowdown in digital advertising and higher costs at present. This is reflected in the company’s recent Q2 results. For the period, total revenues declined 7% year on year to $748.7 million while adjusted EBITDA fell 56% to $50.9 million.
However, there were some positives in the Q2 results. For starters, the company finished the quarter with 1.87 million digital paid subscribers, up 35% year over year. Secondly, the company said that it’s implementing a significant cost reduction program that will lead to a lower and more variable cost structure. It also plans to sell-off non-strategic and real estate assets to free up cash.
Looking ahead, management was confident that the company can navigate the current economic downturn. "We believe our subscription-led business model, robust balance sheet, and experienced management team put us in a solid position to weather this economic downturn and deliver long-term value to shareholders," said Mr. Reed. "While the current operating environment is challenging, we believe we can achieve our longer-term transformational digital growth goals,” he added.
This year, Gannett stock has taken a significant hit. Year to date, the stock is down nearly 60%. Mr. Reed clearly believes it will bounce back. We see this insider buying as a bullish indicator.