Top-level corporate insiders tend to have the most up-to-date information on their companies’ performance. If they’re buying company stock, it’s generally a sign that performance is strong.
In this report, we are going to highlight a large insider purchase at Reckitt Benckiser Group PLC (RB/:LN). Reckitt Benckiser is a leading consumer goods company that owns a wide range of well-known health and hygiene brands such as Dettol, Lysol, and Durex. It is listed on the London Stock Exchange and currently has a market capitalization of £42.8 billion.
Reckitt Benckiser: Insider Buying
Our data shows that on 24th February, Reckitt’s Hygiene President Harold Van Den Broek purchased 24,000 shares at a price of £59.65 per share. After two days, on 26th February, he made another purchase of 6,300 shares at a price of £59.8 per share. Later adding further 1,070 shares to his holdings, on 2nd March, which costed him £61.6 each. These purchases cost the insider a total of approximately £1.9 million.
Large Director Deal
This director deal stands out for two reasons. Firstly, Van Den Broek has a great track record when it comes to timing his purchases well. After his last purchase, in March 2020, the stock rose more than 30% in the next few months. Our Insider Model gives the insider a very high short-term Trading IQ of 120.
Secondly, this is a large purchase. Our records show that it has boosted the size of Van Den Broek’s holding by 80%. This suggests he is confident that the stock is undervalued at present.
Reckitt Benckiser’s recent full-year results were solid. For the year, total group sales were up 11.8%, boosted by the group’s hygiene division which saw sales growth of 19.5%, and e-commerce sales, which were up 56%. Free cash flow came in at a record £3,052 million (2019: £2,145 million) while net debt fell to £9.0 billion (2019: £10.7 billion).
Looking ahead, the group said that it is moving to reposition its portfolio towards higher growth. It also said that it plans to introduce its key hygiene brands, Dettol and Lysol, into 29 new markets in 2021.
“2020 was a turning point for RB. Our performance is strong, we are building capability, actively managing our portfolio and transforming our culture. We expect 2021 to be a year of further strategic progress and we remain confident that we will meet our medium-term targets," said CEO Laxman Narasimhan.
In light of these results, we see the insider buying here as bullish.