12-month performance: +21% Insider activity: Bullish Insider buying pattern: Large purchase from Founder/Chairman Recent news: Bought back stock
There are two main reasons why insiders invest in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the business expect the company’s share price to rise.
In this report, we are going to highlight some interesting insider buying at Element Solutions Inc (ESI:US). Element Solutions is a specialty chemicals company that serves businesses in the electronics, communications, and automotive industries. It is listed on the New York Stock Exchange and currently has a market capitalization of $3.1 billion.
Element Solutions: insider buying
What has caught our attention here is a large purchase from Executive Chairman Sir Martin Ellis Franklin. Form 4 filings show that on 6 October, the insider purchased 500,000 shares at a price of $11.50 per share. The total cost of the purchase was $5.8 million.
Source: 2iQ Research
We see this insider purchase as significant for a couple of reasons. Firstly, Franklin is a top-level insider. He was appointed as Executive Chairman in January 2019 after having served as Chairman of the Board since founding Element Solutions in 2013. It’s likely that he has a very good understanding of both the company and the industry.
Secondly, it is a large purchase. It represents the largest amount of insider buying at Element Solutions within a quarter since late 2018.
Element Solutions recently announced that it had repurchased 1,500,000 shares of the company’s common stock from affiliated entities of Nicolas Berggruen, a co-founder and former director of the Company. This suggests that the company believes its stock is undervalued at present. The purchase of 500,000 shares from the Chairman – also bought from Berggruen – was in addition to this.
Franklin commented: “Element Solutions’ performance through its first year and a half has been exceptional, particularly in light of the macro environment. We have outperformed our end markets, become more efficient, and generated very strong cash flows. I am ever-more confident in our team and our business and encouraged by its momentum heading into the end of this year. Nicolas Berggruen has been a great partner to me in Element Solutions and other investments for many years. While I am sad to see him sell his remaining shares, I am happy those shares have new long-term holders including myself.”
In light of this upbeat statement, we see the insider buying here as a bullish signal. It suggests that the Chairman is confident about the future and that he expects the stock to rise.
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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