When a top-level insider makes a large purchase in their own company, investors should take note. It’s not an exaggeration to say that these individuals are some of the most informed participants in the market.
Here, we are going to highlight a large insider buy at Mohawk Industries Inc (MHK:US). Mohawk Industries is a flooring manufacturer based in the US. It is the world’s largest flooring provider, producing hard, soft, and laminate flooring for commercial and residential use, globally. It is listed on the New York Stock Exchange and currently has a market capitalization of $9.4 billion.
Mohawk Industries Inc: Insider Buying
Our insider transaction data shows that on February 24, the President/COO of Mohawk Industries, Christopher Wellborn, purchased 10,000 MHK shares at a price of $135.76 per share. This purchase cost the insider just under $1.4 million.
This insider trade stands out for two main reasons.
Firstly, Mr. Wellborn has been COO of Mohawk Industries for over sixteen years, which would suggest he knows the business exceptionally well. Meanwhile, he has been involved in the manufacturing industry at a senior level since 1993 when he was CFO at Lenox Inc. This industry experience means he is well placed to accurately assess Mohawk Industries’ prospects and potential.
Secondly, it is intriguing that the COO has chosen to pick up a sizable chunk of stock at these levels. The share price has been weak over the last twelve months and our insider transaction data shows that no insiders bought stock during this period. It is therefore significant that Mr. Wellborn has spent a considerable amount of money on company stock now.
Healthy Sales Growth
Mohawk Industries saw net sales grow to $2.8 billion in Q4 2021. This was a 4.5% increase on Q4 2020, growing to 11.8% on a constant currency and days basis.
Inflationary pressures pushed up the price of production and this meant that net earnings in the quarter were $189 million versus $252 million a year before. However, the company is optimistic that it will be able to introduce price increases to improve profitability, and that the inflationary pressures are short term in nature.
It’s worth noting that in February, the board of directors approved authorization for share repurchases up to $500 million, due to the company’s strong financial position.
“After our record-setting 2021, we are enthusiastic about Mohawk’s future growth and profitability. This year, GDP is expected to grow 3 to 5% in most of our markets, with residential sales remaining strong and commercial improving. Interest rates will likely rise but should remain historically favorable and support continued home sales and remodeling. During the year we anticipate inflation moderating, and constraints in labor, material, and energy declining,” said Jeffrey S. Lorberbaum, Chairman and CEO.
Having read through these Q4 results we believe the recent insider buying at Mohawk Industries is bullish. It suggests that the COO shares the optimistic outlook of the CEO, and in buying a large tranche of company shares, he is indicating that he believes the market is overreacting to short-term inflationary pressures the company is facing.