Insider buying can provide valuable clues about a stock’s potential. Top-level insiders have a deeper insight into their own company’s operations than any outside analyst could ever hope to obtain. If key insiders are buying company stock, then investors should take note.
Here, we are going to highlight some interesting insider trades at SKF AB (SKFB:SS). SKF provides bearings, seals, condition monitoring, and lubrication systems and services. It operates in two segments, Industrial and Automotive. It’s listed on the Stockholm Stock Exchange and currently has a market capitalization of SEK 100 billion.
SKF AB: Insider Buying
Regulatory filings show that on 23 April, the Independent Chairman of the Board, Hans Straberg, purchased 22,000 SKFB shares at a price of SEK 227.7 per share. This purchase cost Straberg approximately SEK 5 million (approx. $600,000) and increased his holding in the company by nearly 150%. The Chief Technical Officer, Victoria Van Camp, also made a purchase, adding 500 shares to her existing holding at a price of SEK 227.6 per share.
Then, on 4 May, the Wallenberg Foundation (a 10% shareholder) purchased 812,999 shares at a price of SEK 217.84 per share. This purchase was worth approximately SEK 177 million.
Large Increase in Holding
This insider activity is worth highlighting for two reasons. Firstly, the Chairman has increased his holding in SKF by a considerable amount in percentage terms. This gives the impression that he is extremely confident that the share price will continue to climb.
Secondly, Straberg has a considerable amount of experience at the boardroom level. As well as holding the position of Chairman at SKF since 2018, he is also the Chairman of Atlas Copco, Roxtec AB, CTEK AB and has held many other Boardroom roles. He worked at AB Electrolux for nearly 40 years and was President and CEO there from 2002 to 2011. This experience means that he is likely to have a good read on industry trends.
Third, this insider activity combined represents the largest amount of insider buying at SKF within a quarter for several years. This suggests that those with the most information on the firm believe that now is a good time to be buying stock.
Strong Organic Growth
SKF produced a solid set of Q1 results, driven by organic growth in Latin America and Asia. The results were impacted by currency headwinds but they showed that momentum within the business is strong. For the period, adjusted operating profit came in at SEK 2.789 billion versus SEK 2.572 billion one year prior. Meanwhile, the adjusted operating margin rose to 14%, which was up from 12.8% the year before. Profit before tax was SEK 2.495 billion against SEK 2.16 billion in Q1 2020. Sales in local currencies grew 17.7% in Latin America and 26.2% in Asia whilst remaining broadly flat in EMEA and North America.
“During the first quarter, we saw strong sales and demand growth. Demand has increased gradually since the trough in the second quarter of 2020. Net sales are expected to continue to grow, reaching pre-Covid levels in the second quarter of 2021: i.e. in line with levels reported in the second quarter of 2019”, said Alrik Danielson, President, and CEO.
On the back of these strong underlying results, we see the insider trading at SKF as bullish. It would suggest that the insiders believe the positive momentum within the business will continue and that the share price will move in an upward trajectory.