Insider buying can provide investors with clues in relation to a stock’s future direction. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.
Here, we are going to highlight an interesting pattern of insider buying at Sanlorenzo SpA (SL:IM). Sanlorenzo is an Italian company that specializes in the design, manufacturing, and distribution of yachts and superyachts. It is listed on the Borsa Italiana and currently has a market capitalization of €566 million.
Sanlorenzo: insider buying
Our records show that in December, Sanlorenzo’s Chairman Massimo Perotti purchased company stock on 10 occasions. In total, the insider purchased 40,745 shares, spending around €650,000 on stock.
This insider buying is worth highlighting for two reasons. Firstly, Perotti has been Chairman of the company since 2005 and is the majority shareholder. This means he is likely to have an in-depth understanding of the company, its performance, and its future prospects.
Secondly, Perotti’s last few purchases have been timed well. Our data shows that the insider also purchased stock in March 2020 and May 2020. Since these purchases, the stock has risen about 20% and 60% respectively.
Bullish broker note
Berenberg recently posted a bullish note on the luxury boating industry. While the firm said that the industry is likely to suffer from the coronavirus in the short term, it also said that it expects a recovery in the mid term, noting that in recovery periods the boating industry has traditionally outperformed other sectors and posted double-digit growth. Berenberg believes that long-term trends of increasing boat sizes, improving selling prices, and growing customers' preference for renting over buying are set to continue after Covid, which should benefit luxury yacht manufacturers.
As for its view on Sanlorenzo, the firm initiated coverage of the stock with a ‘buy’ rating, stating that the company should be able to achieve high-single-digit top-line growth potential by 2023. It also said that Sanlorenzo's healthy balance sheet should enable it to undertake acquisitions while starting to return cash to shareholders.
In light of this positive outlook, we see the insider purchase here as bullish.