There are two main reasons insiders invest in their own companies. They either believe performance is about to get better, or that the company is undervalued. Whatever the reason, it tells us that those within the business expect the company’s share price to rise in the future.
In this report, we are going to highlight an interesting insider purchase at Rothschild & Co SCA (ROTH:FP). Rothschild is one of the world’s largest independent financial advisory groups. Operating in over 40 countries, it provides advisory, wealth management, asset management, and merchant banking services. It is listed on Euronext Paris and currently has a market capitalization of €2.4 billion.
Rothschild & Co: Insider Buying
Our data shows that on 31 March, Managing Partner Francois Pérol purchased 15,000 ROTH shares at a price of €31.15 per share. This purchase – which cost the insider approach €470,000 – doubled his holding to 30,000 shares.
This trade is significant because Pérol is an experienced insider with a vast amount of experience in the financial services industry. Between 1994 and 2001, Pérol served within the French Treasury before being appointed deputy Chief of Staff to Francis Mer, Minister of the Economy, Finance and Industry in the French Government in 2002. Meanwhile, in 2007, he was appointed deputy Secretary General at the Presidency of the French Republic, in charge of economic issues.
Pérol joined Rothschild & Co for the first time in 2005 as a General Partner of Rothschild & Cie and in July 2018 he was appointed Managing Partner of Rothschild & Co Gestion, Co-Chairman of the Group Executive Committee of Rothschild & Co, and General Partner of Rothschild Martin Maurel in France and of Rothschild & Cie. Given this industry and company experience, he is likely to know what he is doing.
Cautiously Optimistic About 2021
Rothschild & Co’s 2020 results were disappointing. Due to the coronavirus, revenue was down 4% while net income was down 22%.
However, looking ahead, the company expects performance to improve. In Global Advisory, the company is cautiously optimistic that the positive trend seen in the last few months of 2020 (revenue for the three months to December 2020 was up 35% year on year) will continue into 2021. Meanwhile, in Merchant Banking, the company expects to continue growing its recurring revenue base, as its most recent funds complete their fundraising process, new funds are launched, and capital is deployed.
“We have started 2021 in a strong position and our business model, built on three different pillars across several geographies has proved extremely solid. Thanks to our strategy of focusing on our clients’ needs and increasing revenue while maintaining a close control over costs, we remain cautiously optimistic for 2021,” the company said.
Given this outlook, we see the insider buying here as bullish.