Insiders sell stock for a number of reasons. They may wish to diversify their assets or pay tax liabilities, for example. They only buy stock for one reason however – they think it will make them money.
Here, we are going to highlight an insider purchase at Kingfisher PLC (KGF:LN). Kingfisher is a multinational home improvement retailer that trades under a number of brand names including B&Q, Brico Depot, Castorama, and Screwfix. The company trades via approximately 1,380 stores as well as online. It’s listed on the London Stock Exchange and currently has a market capitalization of £7.25 billion.
Kingfisher PLC: Insider Buying
Regulatory filings show that on 4 June the Chairman of the Board at Kingfisher, Andrew Cosslett, purchased 97,690 KGF shares at a price of £3.46 per share. This purchase cost the insider approximately £338,000 and increased his holding by around 30%.
This insider trade came onto our radar as it is large in monetary terms and has increased Cosslett’s holding by a significant amount. Our data shows that the Chairman trades sparingly – his last significant purchase was over a year and a half ago at around the £2 level. This trade indicates, therefore, that he sees value at the current share price.
It’s worth noting that the Chairman’s experience is extensive. Not only does he have significant experience in the retail sector with Unilever and Cadbury Schweppes but he also has investment management experience. Previously, he was an operating partner at private equity firm Advent International. This adds weight to the significance of his purchase.
Outperforming a buoyant market
Kingfisher is benefitting from a buoyant home improvement market at present. The Q1 trading update benefited from weak comparatives due to store closures during the 2020 lockdown, however, Kingfisher outperformed its market rivals in the UK and France. Total sales for the quarter were up 61.9% on Q1 2020 at £3.4 billion with average transaction volume and basket size both growing. E-commerce accounted for 21% of sales, up from 18% a year prior.
Kingfisher advised that Q2 has started well with like-for-like sales up 8.2%, reflecting continued strong demand. H1 2021/2022 guidance on LFL sales growth was therefore raised to mid to high teens from low double-figures growth. Adjusted H1 pre-tax profit is expected to come in ahead of previous expectations, in the range of £580 million to £600 million.
“The Group delivered strong sales growth in the first quarter, with LFL sales up 64% and up by 23% on a two-year basis. We continue to see high levels of demand from both new and existing customers, with clear progress made on our ‘Powered by Kingfisher’ strategic priorities,” said Thierry Garnier, CEO.
Given the strong outlook and positive trading update we see the recent insider buying at Kingfisher as bullish. The insider is an experienced professional who has shrewdly bought stock at lower levels previously. His latest purchase suggests he feels the shares are currently undervalued.