Insider buying can provide valuable clues about a stock’s potential. Insiders may sell their company’s stock for a variety of reasons. Yet they only buy stock for one reason – they expect it to go up.
Here, we are going to highlight a large insider purchase at Canfor Pulp Products Inc (CFX:CN). Canfor Pulp Products supplies pulp and paper products in Canada, Europe, Asia, the United States, and internationally. It’s listed on the Toronto Stock Exchange and currently has a market capitalization of CAD $566 million.
Canfor Pulp Products Inc: Insider Buying
Regulatory filings show that on 11 January, the CEO of one of Canfor Pulp Products subsidiaries, Mans Johansson, purchased 108,000 CFX shares at a price of CAD $7.42 per share. This purchase cost the insider approximately CAD $800,000.
This is a substantial purchase by the insider in monetary terms. It indicates that he is confident that there is upside potential in the share price currently.
Interestingly, Johansson has significant experience within the industry. Having served as Managing Director of Vida Wood for 15 years, he was made CEO of Vida Group in 2019 when it was acquired by Canfor Pulp Products. He is therefore likely to have an intimate knowledge of how the industry works.
Signs of Recovery
Canfor Pulp Product’s Q3 results were impacted by Covid-19. Global pulp market conditions were weak and some paper mills were out of operation during the period due to the pandemic. Despite this, sales were still higher at CAD $226.4 million versus CAD $216.9 million in Q3 2019. The operating loss reduced from CAD $44 million in Q3 2019 to CAD $27.6 million in Q3 2020.
There was also some cause for optimism in the outlook with CEO Don Kayne stating: “Market conditions appear to be slowly improving, with various market price forecasts for 2021 guiding to a modest recovery of prices.”
In light of this update, we see the insider buying here as a bullish signal. It suggests that the experienced industry insider believes the shares continue to be undervalued by the market at current levels.