Top-level corporate insiders have deep insight into their companies’ operations. If they’re buying company stock, investors should take note.
In this report, we are going to look at some insider buying at Brenntag AG (BNR:GR). Brenntag is a global leader in chemical distribution. Operating in nearly 80 countries, the company manages complex supply chains for both chemical manufacturers and consumers by simplifying market access to thousands of products and services. It is listed on Deutsche Börse’s Xetra and currently has a market capitalization of €10.4 billion.
Brenntag: Insider Buying
Our records show that in January, two insiders at Brenntag have purchased stock. On 11 January, CEO Christian Kohlpainter purchased 5,000 Brenntag shares at a price of €68.00 per share. Then, on 14 January, COO Steven Terwindt purchased 1,250 shares at a price of €67.87 per share. Combined, these insiders spent around €425,000 on BNR stock.
Industry ExpertiseThis insider activity is worth highlighting for a couple of reasons. Firstly, we like the fact that two insiders have purchased stock within a short period of time. This tells us that there is a consensus of opinion that the stock offers value right now. It’s worth pointing out that the last time two insiders purchased stock within a short period of time, in March last year, the stock rose around 70% in the next six months.
Secondly, both insiders have considerable industry experience, which we see as a positive. Kohlpainter has more than 25 years of experience in the chemicals industry and was previously CEO of Chemische Fabrik Budenheim. Meanwhile, Terwindt has worked at Brenntag since 1998. This experience means they are likely to have a good read on both the industry and the company’s future prospects.
Strong Q3Brenntag delivered a strong performance in the third quarter of 2020, given the economic environment.
For the quarter, operating EBITDA was €264.4 million, up 4.9% on the prior year, while free cash flow was €420.7 million – significantly above the previous year’s figure of €245.9 million.
“Brenntag achieved strong results in the third quarter of 2020. The Covid-19 pandemic has been with us - as with many other companies - throughout the year and has significantly impacted the overall economic environment. Nevertheless, we once again show a positive business development and our operations remained with limited effect by the Covid-19 crisis in the reporting period,” commented Kohlpainter.
Since these results, a number of brokers have lifted their price targets for the stock. JP Morgan, for example, has raised its target price to €72.50 from €66.50. Meanwhile, Credit Suisse has raised its target price to €78 from €73.50.
In light of these developments, we see the insider buying here as a bullish signal.