CFO purchases can be powerful insider transaction signals. CFOs have considerable insights into their firms’ financial health and some studies have found that these insiders earn higher abnormal returns following their purchases of company shares than CEOs.
In this report, we are going to highlight a CFO purchase at Volvo AB (VOLVB:SS). Volvo AB is the parent company of the Volvo Group – a leading manufacturer of trucks, buses, construction equipment, diesel engines and marine and industrial engines that operates in 190 markets worldwide. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 432 billion.
Volvo AB: Insider Buying
Our records show that on 3 February, Volvo CFO Jan Ytterberg purchased 7,000 Volvo B shares at a price of SEK 215 per share. This purchase – which cost the insider roughly USD $180,000 – increased his holding from 2,031 shares to 9,031 shares.
This insider purchase stands out for a couple of reasons. Firstly, it is a substantial purchase. Our data shows that it has increased the size of Ytterberg’s holding by 345%. This suggests the insider is confident the stock is undervalued at present.
Secondly, Ytterberg has significant industry experience. At Volvo, he has been a member of the Group Executive Board since November 2018. Previously, he was CFO of Scania Group between 2006 and 2015. Given this experience, he is likely to have a good read on the company’s prospects.
Extra Dividend Declared
Volvo reported fourth-quarter core earnings that were well above analysts' expectations earlier this month. Adjusted operating profit for the quarter rose to SEK 10.93 billion – significantly above the SEK 8.77 billion figure forecast by analysts – from SEK 9.22 billion a year earlier. Order intake for the quarter was 86,069 trucks, up 61% on the same period last year.
While the company warned that its supply chain is “strained in many areas” and that there are likely to be production disturbances and increased costs Q1 2021, it declared an ordinary dividend of SEK 6.00 per share as well as an extra dividend of SEK 9.00 per share. This extra dividend suggests that management is confident about the future.
In light of this quarterly performance and the extra dividend, we see the insider purchase here as a bullish signal.