If a CEO is buying company stock, it’s often worth investigating the stock further. CEOs tend to have an intimate understanding of their businesses and are usually way ahead of analysts and portfolio managers when it comes to revenue and earnings trends.
In this report, we are going to highlight a large CEO purchase at Archer-Daniels-Midland Co (ADM:US). Archer-Daniels-Midland is a leading agricultural origination and processing company. A global leader in both human and animal nutrition, it manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. The company is listed on the New York Stock Exchange and currently has a market capitalization of $33.4 billion.
Archer-Daniels-Midland: Insider Buying
Our insider transaction data shows that on 29 July, ADM’s Chairman, President, and CEO Juan R. Luciano bought 16,790 shares at a price of $59.54 per share. This purchase – which cost the insider just under $1 million – increased his holding to 537,191 shares.
A top-level Insider
Mr. Luciano has considerable company and industry experience. He joined ADM in 2011 as Chief Operating Officer and was named president in February 2014 and CEO in January 2015. In January 2016, he became Chairman of the Board. Before joining ADM, he had a successful 25-year tenure at The Dow Chemical Company, where he last served as President of the Performance division.
This trade from Mr. Luciano caught our attention for two reasons. Firstly, it’s substantial in size. This suggests that the insider is confident the stock is set to rise. Secondly, our data shows that the insider has a good track record when it comes to timing his purchases and sales well.
Archer-Daniels-Midland posted a strong set of second-quarter results in late July. For the quarter, revenue came in at $22.9 billion, an increase of 41% year on year. Meanwhile, earnings per share came in at a record $1.26 or $1.33 on an adjusted basis, versus $0.84 and $0.85 respectively in Q2 2020. Return on invested capital (ROIC) was 9.7%, significantly higher than the prior-year period’s figure of 8.1%.
“It was yet another excellent quarter for ADM, as our team delivered record earnings, with strong year-over-year profit growth across all three business units,” commented Mr. Luciano.
Looking ahead, the company said that it expects the momentum to continue in the second half of the year, and that the outlook for the full year is very strong.
“We’re excited about our growth trajectory as we continue to expand our participation in large and fast-growing categories, from alternative proteins to renewable green diesel to plant-based biosolutions, with all of our strategic efforts underpinned by our unique opportunity to use ADM’s integrated value chain to advance decarbonization of the food and agriculture industries. Given our great start to the year and our expectation of continued momentum in the second half, we are confident in delivering very strong full-year earnings, and we remain well-positioned for robust, sustained growth in the years to come,” said Mr. Luciano.
In light of these results and the outlook, we see the insider buying here as a bullish indicator.