Insiders can provide important signals to investors. Studies have demonstrated that insider buying by senior management is often a significant indicator that the trading prospects of a company are improving or that the company is undervalued by investors.
In this note, we are going to analyze multiple insider stock purchases of Superdry PLC (SDRY:LN) by the Founder/CEO, the Chairman and an Independent Director. Superdry designs, produces and sells clothing and accessories predominantly under the Superdry brand for men and women. Superdry is listed on the London Stock Exchange and has a market cap of £126 million.
Superdry: insider buying
Over a four-day period between the 21st September and the 24th September Julian Dunkerton, the Founder/CEO of Superdry, bought 1,149,869 shares for a monetary value of around £1.6 million. The Chairman bought 50,000 shares on the 24th September and an Independent Director bought 20,000 shares on September 21st.
Source: 2iQ Research
This pattern of insider buying is significant for numerous reasons. The most important being that the Founder/CEO is closest to the business and can act on observations that outsiders themselves cannot see in real time. This is the first significant share purchase that Julian Dunkerton has made since being reappointed as CEO in 2019 after a five-year gap. It has increased his stake by 7.5%.
The further share purchases by the Chairman and Independent Director give further weight to the purchase and give a signal to investors that trading conditions are expected to improve into the future.
Superdry has experienced extremely difficult trading conditions over the last two years and has suffered a series of profit warnings as a consequence. The shares started 2018 at close to 2,000p and are now trading at around the 154p mark.
The latest update from Superdry suggests that the stock could now be a recovery play. Store closures meant that Superdry posted a pre-tax loss of £42 million in the latest annual accounts but the company said that trading performance has improved since April despite the uncertainty caused by Covid-19.
Now that the passionate Founder is back in charge as CEO and Superdry is executing a sensible cost-cutting program, the market is starting to take note. Shares have bounced 44% over the last six months and there appears to be further momentum to the upside.
We see the recent insider purchases at Superdry as bullish. These purchases suggest that the Founder/CEO and fellow insiders believe that the improvement in trading will continue.