Insider transaction activity can give investors a more complete view of activity within the world’s publicly-listed companies. No one has more knowledge of a company, and its prospects, than its executives and directors.
In this article, we are going to highlight some interesting insider buying at Hermes International (RMS:FP). Hermes is a French luxury goods manufacturer that sells leather goods, clothing, scarves, home furnishings, perfume, watches, and jewelry. It is listed on the Euronext Paris and currently has a market capitalization of €90 billion.
Hermes: insider buying
Since the start of December, we have observed two bullish patterns of insider transaction activity at Hermes International. The first was the purchase of 2,400 shares by ex-President and CEO Laurent E. Mommeja on 7 December. This purchase was worth just under €2 million.
The second was two purchases from Supervisory Board member Renaud Mommeja on 14 December and 17 December. Here, the insider purchased 2,500 shares, spending a total of about €2.1 million on RMS stock.
Previous insider trades were timed well
This insider activity is significant for two reasons. Firstly, these are substantial purchases, which indicate that the insiders are confident about the future.
Secondly, insiders at Hermes have a good track record when it comes to the timing of purchases. The last time we observed substantial insider buying was on 12 June 2020 when management holding company H51 spent €20 million on stock. Since then, the stock has risen more than 20%, outperforming the CAC 40 index comfortably.
Hermes experienced a challenging first half of 2020 due to the coronavirus. However, recently, the company has shown signs of a recovery. In the third quarter, for example, sales rose 7% driven by strong activity in the group's stores, momentum in Asia, and a significant improvement in all other geographical areas. The group said that this positive momentum had continued into the fourth quarter.
One other factor that has helped Hermes recover from Covid-19 is its online sales channel. In the first nine months of the year, online sales grew by nearly 100% across all regions. The group advised in October that the online channel is now its ‘biggest store.’
In light of this sales rebound, and the strength of its online channel, we see the insider buying as a bullish signal. It suggests that the insiders are confident about the future.