Top-level corporate executives have a deeper insight into their own company’s operations than any outside analyst or fund manager could ever hope to obtain. They are the smart money. If they’re buying stock, it’s worth taking note.
Here, we are going to highlight three insider purchases at Spectris PLC (SXS:LN). Spectris manufactures and sells measuring instruments and controls worldwide. It’s traded on the London Stock Exchange and currently has a market capitalization of £3.6 billion.
Spectris PLC: Insider Buying
Regulatory filings show that on 25 February the CEO of Spectris, Andrew Heath, purchased 4,968 SXS shares at a price of £30.19 per share. This purchase cost the insider approximately £150,000 and raised his holding by around 22%. On the same day, CFO Derek Harding also purchased 3,166 SXS shares at a price of £30 per share. This purchase cost Harding around £95,000 and increased his holding by 76%. Mark Williamson, the Chairman, also made a small addition to his holding.
We think it is significant that three key insiders bought stock on the same day. This suggests that there is a lot of confidence in the future prospects of the company. Our data shows this is the first significant cluster buying for over a year.
It’s worth noting that the CEO and CFO have increased their holdings in the company by a meaningful amount, in monetary terms and in comparison to the amount of stock they held previously. This signals that they firmly believe the stock will go up in value.
Strong Order Book
Spectris’ 2020 results suffered due to Covid-19 but the company did deliver a financial performance that was ahead of expectations. Sales were down 18% year on year to £1.336 billion while profit before tax fell 33% to £166.4 million. However, the company was able to announce a 5% increase in the full-year dividend and a £200 million share buyback. The company reduced costs and implemented a profits improvement program.
Looking ahead, the outlook for the group is promising. The company advised that the actions taken last year position the group well for any market recovery in 2021. The cost base has been reduced and capability retained, creating a strong operating leverage opportunity and balance sheet optionality.
“The stronger order intake in the last three months of 2020 provides momentum for the first quarter of 2021,” said CEO Andrew Heath.
Given the optimism in the outlook statement, we see the insider buying here as bullish. It suggests that key insiders see a recovery in the company’s fortunes and therefore upward momentum in the share price.