CFO purchases can be extremely informative insider trades. CFOs tend to have a thorough understanding of their firms’ finances and some studies have found that these insiders earn larger profits following their purchases of company shares than CEOs.
In this report, we are going to highlight a CFO purchase at Unilever PLC (ULVR: LN). Unilever is a leading consumer goods company that operates in nearly 200 countries worldwide. The group owns over 400 brands including Dove, Lipton, Ben & Jerry’s, and Domestos. The company is listed on the London Stock Exchange and the Euronext Amsterdam and currently has a market capitalization of £105.4 billion.
Unilever PLC: Insider Buying
Our insider transaction data shows that on 27 July, Unilever’s CFO Graeme Pitkethly bought 18,350 ULVR shares at a price of £40.86 per share. This purchase – which cost the insider around £750,000 – increased his holding to 161,062 shares.
Mr. Pitkethly has considerable company experience. He joined Unilever in 2002 and was previously Executive Vice President and General Manager of the Unilever UK and Ireland business. Prior to this, he held a number of senior financial and commercial roles within the company, including Senior Vice President of Finance for Global Markets, Global Head of M&A, Head of Treasury, Pensions and Tax and Chief Financial Officer of Unilever Indonesia. This background means he is likely to know the company very well.
What stands out about his recent purchase is the size of the trade. The fact that the insider has spent roughly £750,000 on stock, and increased the size of his holding by more than 10%, suggests that he is very confident that the stock is undervalued at present.
Share Price Pullback
Unilever shares recently pulled back after the company posted its half-year report on 22 July. While the report showed solid top-line growth of 5.4%, investors didn’t like the fact that the company’s operating margin declined 100 basis points to 18.8% and earnings per share declined 2.0% to €1.33 on the back of higher input costs. Investors also didn’t like the near-term guidance – Unilever warned that surging commodity costs would squeeze its full-year operating margin.
Looking beyond the inflation issues, however, the company was relatively optimistic about its future growth prospects.
“Competitive growth is our priority, and we are confident that we will deliver underlying sales growth in 2021 well within our multi-year framework of 3-5%, despite more challenging comparators in the second half,” said CEO Alan Jope.
The large purchase from the CFO suggests that the insider is confident about the future and that he expects the stock to bounce back. We see this insider purchase as a bullish indicator.