Insiders tend to be value investors. If they’re buying company stock, it’s usually because they believe the stock is undervalued.
Here, we are going to highlight an interesting insider purchase at Homeserve PLC (HSV:LN). Homeserve is a home assistance provider that principally operates in the UK, North America, and Europe. The company provides cover for emergencies or damage in and around the home. It also offers one-off emergency repairs to clients not using their cover as well as boiler replacement and servicing and sells the award-winning leakbot that detects hidden leaks in the home. It is traded on the London Stock Exchange and currently has a market capitalization of £3.05 billion.
Homeserve PLC: Insider Buying
Our insider transaction data shows that between November 26 and November 29, the Chairman of the Board at Homeserve, Thomas Breen, purchased 50,000 HSV shares at an average price of £9.10 per share. This purchase cost the insider around £450,000 and doubled his holding in the company.
Large Increase in Holding
This insider activity is worth highlighting for a couple of reasons.
Firstly, Mr. Breen has increased his holding significantly from 50,000 to 100,000 shares. This suggests to us that he is very confident that the share price will move upwards. He has spent close to £500,000 on company stock which indicates that this is a high-conviction purchase.
Second, Mr. Breen has extensive experience running large and successful businesses. He was at DCC PLC for thirty years and rose to become Chief Executive Officer of the FTSE 100 business until leaving in 2017. He is also a qualified chartered accountant, which means that he is likely to have a strong understanding of company financials and be able to assess the intrinsic value of a business.
Interim Dividend Raised
Homeserve recently posted a solid set of H1 results for the six months to 30 September.
For the period, revenue came in at £610.5 million, which was an increase of 14% on the year prior. A strong performance in North America drove operating profit up 24% versus the first half of 2020. New partnerships with utilities companies in the region gave the company access to 6.1 million more households. Encouragingly, the Home Experts division moved into profitability. The financial position of the business remained sound with leverage at 2.1x net debt to EBITDA.
On the back of this strong performance, the group increased its interim dividend 10% to 6.8 pence.
“This is another very good set of results for HomeServe, with significant progress across all areas of the business. North America delivered an outstanding performance and is ahead of our original plan to achieve our next milestone of $230m adjusted operating profit. Our ambitions for the current financial year are unchanged, which means that we expect to deliver an acceleration in performance this year, followed by significant longer term growth. Creativity, delivery and momentum have never been stronger,” said Richard Harpin, Founder and Group Chief Executive.
On the back of these strong results, we see the recent insider buying at Homeserve as bullish. The shares have been subdued for the majority of 2021 and the large insider purchase made by Mr. Breen suggests he is very confident that the market is undervaluing the shares.