There are few predictive factors more significant than insider transactions. No one has more insight into a company than its executives and directors and research shows that insider trading activity can provide powerful return signals.
In this report, we are going to highlight some large insider purchases at Kraft Heinz Company (KHC:US). Kraft Heinz is one of the largest food and beverage companies in the world. Its brands include Kraft, Heinz, Philadelphia, Kool-Aid, Jell-O, Capri Sun, and Golden Circle. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $41 billion.
Kraft Heinz: insider buying
In the last month, two insider transactions at Kraft Heinz have caught our attention. The first was a $421 million purchase of stock by director Alexandre Van Damme on 9 November. The second was a $3 million purchase of stock by director Elio Leoni Scati on 2 December.
These insider purchases are significant for several reasons. Firstly, they are large purchases. The size of the transactions indicate that these insiders firmly believe that Kraft Heinz stock is undervalued at present.
Secondly, both insiders have substantial industry experience. Van Damme – who has served on the Kraft Heinz board since April 2018 – has served as a member of the board of AB InBev since 1992. His experience at a large brewing company means he has valuable expertise in business development, supply chain management, marketing, finance, risk assessment, and strategy. Meanwhile, Elio Leoni Sceti is the Co-Founder and Chairman of The Craftory, a global investment house for purpose-driven CPG challenger brands. Previously, he served as CEO of Iglo Group, a frozen food company whose brands include Birds Eye, Findus and Iglo. He also held senior leadership roles at Procter & Gamble and Reckitt Benckiser. The fact that such experienced insiders have purchased KHC stock is very encouraging.
Optimistic about the future
Kraft Heinz posted a solid set of third-quarter results in late October. For the period, net sales were up 6.0% while Adjusted EBITDA was up 13.5%. Adjusted EPS increased 1.4%. The full-year outlook was raised to mid-single-digit organic net sales growth and high-single-digit constant currency Adjusted EBITDA growth.
“The continuation of our strong growth into the third quarter is a reflection of the agility we are creating as an organization and because of that, we are raising our outlook for the full year,” commented Kraft Heinz CEO Miguel Patricio. “We are building momentum, and we are confidently optimistic about our near-term performance” he added.
In light of these results, and the confidence from management, we see the large insider purchases here as a bullish signal.