CEOs tend to have superior insight into their companies’ operations and performance. If these insiders are buying company stock, it can pay to take a closer look.
Here, we are going to highlight a CEO purchase at Finning International Inc (FTT:CN). Finning International is the largest Caterpillar equipment dealer in the world. As well as selling and renting vehicles, machinery and power and energy systems, the company also provides parts and services equipment. Its clients include businesses involved in the mining, construction, petroleum, and forestry industries. It’s traded on the Toronto Stock Exchange and currently has a market capitalization of CAD $5.41 billion.
Finning International Inc: Insider Buying
Regulatory filings show that on 5 August, the President and CEO of Finning International, L. Scott Thomson, purchased 7,500 FTT shares at a price of CAD $33.74 per share. This purchase cost the insider approximately CAD $250,000.
Our data shows that Mr. Thomson purchased 9,500 FTT shares at the end of May at levels around 10% lower than where the shares are trading currently. This suggests that he is able to pick his trading levels well.
It’s worth noting that Mr. Thomson has a finance background. Previously, he was Vice President at Goldman Sachs. So, he is likely to have a good understanding of the stock’s intrinsic value.
Last year, Finning was significantly impacted by Covid-19, however, recent Q2 2021 results suggested that the company is now recovering.
For the period, net revenue came in at CAD $1.7 billion, up 28% on Q2 2020 and up 16% compared to Q1 with demand for new equipment strong across all geographies. The Q2 EPS of CAD $0.56 was a record for the second quarter. Adjusted ROIC for the quarter was 13.3%, up 370 basis points on Q4 2020. On the back of these results, the group hiked its dividend by around 10% to CAD $0.90.
“We are pleased with our strong execution and results in the second quarter. With a reduced cost base and more efficient operations and supply chain, we are confident in our improved earnings capacity, which puts us firmly on track to achieve the mid-cycle targets we set out during our Investor Day in June. Our outlook remains positive as the global economy recovers in 2021 and beyond,” said Mr. Thomson.
Given the strong recovery at Finning International and the confident outlook statement, we see the recent insider trading at the company as bullish. It would suggest that Thomson is very confident that the recovery will continue and that the shares will move upwards as a consequence.