Insider buying provides investors with valuable information about a stock’s future prospects. An insider may sell their company’s stock for many reasons. But they only buy stock for one reason – they expect it to go up.
Here, we are going to highlight an insider trade at Whitbread PLC (WTB:LN). Whitbread is a UK company that operates hotels and restaurants in the UK and Germany. The group has around 800 hotels under its management and also runs the restaurant chains Beefeater, Bar + Block, Cookhouse + Pub, Brewers Fayre, Table Table and Whitbread Inns. It’s traded on the London Stock Exchange and currently has a market capitalization of £6.4 billion.
Whitbread PLC: Insider Buying
Regulatory filings show that on 2 August, the Chairman of the Board at Whitbread, Adam Crozier, purchased 6,430 WTB shares at a price of £31.11 per share. This purchase cost the insider approximately £200,000 and increased his holding by around 86%
Significant Increase in Holding
This trade caught our attention due to the fact it nearly doubled the size of the Chairman’s holding. The size of the trade suggests that Crozier is confident in Whitbread’s prospects and that he believes the shares are undervalued. Crozier has held a number of high-powered roles within different industries and is a very well respected businessman. He has held the CEO role at ITV, the Football Association, Royal Mail Group, and Saatchi and Saatchi. Given his business experience, it is significant that he is choosing to buy company stock.
It’s worth noting that two other Directors at Whitbread have bought stock in recent months. This suggests that there is a high-level of confidence amongst employees at the top of the company.
Whitbread’s Q1 results, posted in June, were heavily affected by Covid-19 but there were some encouraging signs within the update, suggesting that better times lie ahead for the company.
98% of its hotels and restaurants in the UK were open by the end of the quarter and forward booking trends were very strong outside of airport locations and central London. The company saw encouraging trends in the UK post May 17 when overnight leisure stays were permitted and accommodation sales were only down 27.3% on Q1 2020 in the thirty days post May 17.
Nineteen of the thirty hotels in Germany were operational at the end of Q1 and the company saw a rise in occupancy levels albeit the market remained challenging. Cash outflow was in line with guidance and net debt of £70.6 million meant the company has no concerns financially.
"The Group traded significantly ahead of the market during the quarter, despite the impact of the UK Government restrictions that were in place for the majority of the first quarter. Trading in the UK since May 17, when overnight leisure stays were permitted, and when our restaurants fully reopened for indoor service, has been encouraging. Additionally, our forward bookings continue to improve, benefiting from the anticipated post-lockdown bounce in leisure demand, and a continued gradual improvement in business bookings. During the first quarter we opened 10 new hotels in the UK,” said Alison Brittain, CEO.
On seeing the improving trends at Whitbread and the optimism in the outlook for the group, we view the recent insider buying as bullish. It suggests to us that the Chairman believes the stock is undervalued and that the share price will rise as recovery takes hold.