12-month performance: +25% Insider activity: Bullish Insider buying pattern: Large purchase from CEO Recent news: Published financial guidance for 2020
A CEO has deeper insight into their own company’s operations than any outside analyst or fund manager could ever hope to obtain. If these insiders are buying stock, investors should take note.
Here, we are going to highlight a recent CEO purchase at Brenntag AG (BNR:GR). Brenntag is a global leader in chemical distribution. The company is listed on the XETRA and currently has a market capitalization of €8.5 billion.
Brenntag: insider buying
An analysis of insider transaction data reveals that on 24 September, CEO Christian Kohlpainter purchased 5,000 Brenntag shares. The insider paid a price of €54.28 per share. The total cost of the transaction was €271,400. This purchase increased the insider’s holding from 19,000 shares to 24,000 shares.
Source: 2iQ Research
High insider IQ
This CEO purchase looks interesting for a couple of reasons. Firstly, it is a relatively large purchase for the insider. It has increased the size of his position by 26%.
Secondly, Kohlpainter has a good track record when it comes to timing his trades. After he last purchased Brenntag stock on 26 March, the stock rose around 40% over the next three months. Overall, he has a 2iQ short-term trading IQ of 112, which is relatively high.
Sound earnings growth in H1
After reporting a solid set of Q2 results in July – which were well above market expectations – Brenntag published new forecasts for financial year 2020 on 15 September. The original forecast for 2020, published in the 2019 annual report, was suspended in April due to the uncertainty associated with Covid-19. However, the company has said that as a result of sound earnings growth in the first half of 2020, it now expects operating EBITDA for 2020 to be between €1,000 million and €1,040 million (2019: €1,001.5 million). Analysts at JP Morgan raised their target price to €66.50 from € 63.50 on the back of this update.
In light of these developments, we see the insider buying here as a bullish signal. The company appears to have navigated Covid-19 successfully and the CEO clearly expects the stock to climb higher.
Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.
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