Insider Buying

Insider Buying Report: Fonterra Co-Operative Group (FCG:NZ)

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Fonterra Co-Operative Group (FCG:NZ)

12-month performance: +2%
Insider activity: Bullish
Insider buying pattern: Large purchases from Chairman-elect
Recent news: Raised milk prices

Insiders tend to invest in their own companies for one of two reasons. They either believe that business performance 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 insider buying at Fonterra Co-Operative Group (FCG:NZ). Fonterra Co-Operative is a New Zealand-based company that operates in the dairy industry. It is responsible for around 30% of the world’s dairy exports. The company is listed on the New Zealand Stock Exchange and currently has a market capitalization of NZD $6.6 billion.

Fonterra Co-Operative: insider buying

Our records show that this month, Fonterra’s Chairman-elect, Peter McBride, has purchased company stock three times. In total, the insider – who was elected to the Fonterra board in 2018 and is set to become Chairman in November 2020 – has bought 166,572 FCG shares. These purchases have cost McBride approximately NZD $670,000.

FCG-NZ (chart)   Source: 2iQ Research

First insider purchases since 2018

This insider transaction activity is worth flagging for a couple of reasons. Firstly, insiders at Fonterra Co-Operative don’t buy stock very often. These purchases from the Chairman-elect are the first insider purchases since late 2018.

Secondly, it is a relatively large amount of buying. The three purchases combined are seven times larger than the last insider purchase here.

Increasing demand from China

Fonterra recently announced that it has raised its farmgate milk price (the price it pays its farmers for milk) due to increasing demand from China. The dairy exporter said it lifted its farmgate milk price range to between NZD $6.30 and NZD $7.30 per kilogram of milk solids (kgMS), up from NZD $5.90 to NZD $6.90 per kgMS, implying a midpoint around 6% higher than before.

"Despite the initial impact of Covid-19, we have seen demand for dairy in China recover quickly," Chief Executive Officer Miles Hurrell said in a statement. “Demand for Whole Milk Powder, which is a big driver of milk price, has been stronger than expected" he added.

In light of this development, we see the insider buying here as a bullish signal. It suggests that the insider is confident about the future.