There are two main reasons why insiders invest in their own companies. They either believe that business is about to get better or that the company is undervalued. Whatever the reason for the insider buying, outsiders only need to know one thing: insiders believe that the company’s share price will go up.
Here, we are going to highlight insider buying at Ocado Group PLC (OCDO:LN). Ocado Group is a UK-based online grocery retailer and logistics company that operates in the UK and internationally. As well as delivering groceries to households in the UK via its high-tech warehouses that use robotic systems to increase efficiency, Ocado offers its fulfillment and logistics solutions to other retailers globally. It’s traded on the London Stock Exchange and currently has a market capitalization of £13.68 billion.
Ocado Group PLC: Insider Buying
Regulatory filings show that on 19 July, the CEO of a major division of Ocado, Luke Jensen, purchased 11,251 OCDO shares at a price of £17.66 per share. This purchase cost the insider around £200,000 and increased his holding by 13%.
Then, on 21 July, the Independent Chairman of the Board, Richard Haythornthwaite, bought 5,750 OCDO shares at a price of £17.41. This insider stock purchase cost just under £100,000 and increased Haythornthwaite’s stake by around 150%.
These insider trades came to our attention because both are of a large value in monetary terms. This suggests that the insiders are confident in the future prospects of Ocado Group. Haythornthwaite has also increased his stake significantly which reinforces the view that he is bullish on the company’s prospects.
Additionally, both of the insiders have extensive business experience and impressive credentials. Haythornthwaite served as the CEO of Invensys from 2001 to 2005. He was also Chairman of Mastercard and Network Rail and was a partner at Star Capital Partners.
Jensen was previously a Senior Advisor at Boston Consulting Group and has held the position of Group Development Director at Sainsbury’s. He is a Non-Executive Director at Asos PLC and at Hana Group SAS.
Continued Revenue Growth
Ocado Group produced a strong set of H1 2021 results. The group’s revenue of £1.32 billion was an increase of 21.4% compared to H1 2020. The retail segment produced revenue of £1.2 billion in the half which was an increase of 19.8% on the prior year whilst the International Solutions revenues of £26.6 million were in line with expectations. EBITDA more than trebled to £61 million compared to the year before whilst losses before tax reduced significantly. Cash balances were healthy at the end of the period at £1.7 billion, and will allow the company to pursue expansion in the UK and Internationally.
“Over the last eighteen months, we have shown that the Ocado model works even in the most challenging and fluid of environments. That ours is a proven model in online grocery has been again demonstrated by the strong performance of Ocado Retail, the historic core of the Ocado business, which has led the market in customer experience, increasing sales by 20% in the period, thanks to a significant increase in customer numbers, while continuing to show sustainable and industry-leading profitable growth,” said Tim Steiner, CEO of Ocado Group.
On the back of this encouraging update and confident outlook, we see the insider buying at Ocado Group as bullish. It would suggest that both insiders believe the shares are undervalued and that they expect the shares to move upwards from the current levels.