If a corporate insider is spending millions on company stock, it can pay to take a closer look. Insiders are some of the most informed participants in the market, and their trades can provide valuable investment insights.
In this report, we are going to highlight a large insider purchase at Chewy Inc (CHWY:US). Chewy is an American online retailer that specializes in pet food. Launched in 2011, it offers the personalized service of a neighborhood pet store alongside the convenience and speed of e-commerce. The company is listed on the New York Stock Exchange and currently has a market capitalization of $12.07 billion.
Chewy Inc: Insider Buying
Our insider transaction data shows that on June 6, board member James Star purchased 180,636 shares at a price of $27.71 per share. This trade cost the insider just over $5 million and increased his holding to 257,082 shares.
This trading activity is worth highlighting due to the fact that Mr. Star is an experienced investor. Currently, he serves as Executive Chairman and Investment Committee Chair of Longview Asset Management LLC, a multi-strategy investment firm that invests on behalf of individuals, trusts, and charitable foundations. He has previously served as a director or trustee of pension funds and registered mutual funds. Given his background, it’s fair to assume that he knows what he is doing here.
Additionally, Mr. Star has increased the size of his holding by 236% with this trade. The fact that the insider has upped his stake by such a large percentage suggests he is very confident the stock is set to move higher.
Chewy recently posted Q1 results that were ahead of expectations.
For the quarter, net sales came in at $2.43 billion, up 14% year on year, and ahead of the consensus revenue forecast of $2.42 billion. Meanwhile, the group delivered sequential improvements in gross margin and profitability, with gross margin rising to 27.5% from 25.4% in Q4 2021, and adjusted EBITDA rising to $60.5 million from a loss of $28.1 million in Q4 2021.
As a result of this performance, sentiment towards the stock – which has fallen significantly over the last year – has improved. Analysts at RBC, for example, noted that Chewy’s results support its view that pet care is "somewhat resistant to inflationary/recessionary environments”, and said that they expect sales to rise in H2. And analysts at Evercore ISI said that they see the potential for revenue growth acceleration in the second half of the year.
It’s worth noting that short interest here has also decreased recently. Our data shows that since the start of April, the number of shares on loan has declined from 34.1 million to 26.0 million. That is a significant decrease, even if short interest is still relatively high at around 30% of the free float.
Putting this all together, we see the insider buying here as a bullish indicator.