Company insiders are some of the most informed participants in the market and research shows that their trading activity can provide powerful return signals. If insiders are buying stock, investors should take note.
Here, we are going to flag a bullish insider purchase at Alliance Data Systems Corp (ADS:US). Alliance Data Systems is a provider of data-driven loyalty and marketing services to consumer-facing companies. It operates through two segments: Alliance Data Card Services, which manages more than 145 branded credit programs, and LoyaltyOne, which provides coalition and short-term loyalty programs. The company is listed on the New York Stock Exchange and currently has a market capitalization of $3.6 billion.
Alliance Data Systems: Insider Buying
Form 4 filings show that on 1 February, board member John Gerspach – who was previously CFO at Citigroup between 2009 and 2019 – bought 6,000 ADS shares at a price of $68.46. This purchase cost the insider a total of $410,753.
This insider purchase is worth highlighting for two reasons. Firstly, Gerspach’s last purchase was timed very well. In June, we noted that the insider had spent $257,550 on stock when the share price was near $50. Since then, it has risen to $75, delivering a gain of 50%.
Secondly, our data shows that this transaction has increased the size of Gerspach’s holding by 60%. This suggests he is quite confident the stock is set to keep rising. Our Insider Model views this insider buying activity as bullish.
Alliance Data Systems was impacted significantly by the coronavirus pandemic last year. However, recent results have shown that the company is slowly recovering.
Fourth-quarter results, for example, showed a continued gradual recovery in Card Services credit sales with success in the company’s beauty and health & wellness verticals contributing to a 24% sequential increase in total credit sales over the holiday period.
It’s worth noting that the company recently acquired FinTech company Lon Inc., a technology-driven digital payments company operating under the trademark Bread which offers an omnichannel solution for retailers and platform capabilities to bank partners. With Bread, Alliance Data will offer its brand partners and their customers a number of ways to finance their purchases.
“The combination of Bread's innovative FinTech capabilities and Card Services' funding, marketing, data & analytics, and underwriting expertise provides promising new opportunities for growth and synergies,” said Ralph Andretta, President and CEO, in the company’s recent results.
In light of these developments, we see the insider buying here as bullish.