CFO purchases can be very informative insider transactions. CFOs have deep insights into their firms’ financial health and some studies have found that these insiders earn higher returns following their purchases of company shares than CEOs.
In this report, we are going to highlight a CFO purchase at WPP PLC (WPP:LN). WPP plc is a media company with a global footprint. Operating in over 100 countries worldwide, it plans and creates marketing campaigns and branding campaigns, designs adverts, and provides media buying services. The company is listed on the London Stock Exchange and currently has a market capitalization of £11.4 billion.
WPP PLC: Insider Buying
Our records show that on 25 March, WPP’s CFO John Rogers bought 43,068 shares at a price of £9.25 per share. This purchase – which cost the insider just under £400,000 – increased his holding from 165,166 shares to 208,234 shares.
Recent Director Deals Have Been Timed Well
This insider purchase is worth highlighting for a number of reasons. Firstly, it is a substantial purchase in monetary terms. Our data shows that it is the second largest insider purchase at WPP over the last two years.
Secondly, it has increased the size of Rogers’ holding by a significant 26%. This suggests that he is confident the stock is set to move higher.
Third, recent insider purchases at WPP have been timed well. In October, CEO Mark Read purchased 85,000 shares at a price of £5.67 per share. Since then, the stock has risen about 60%.
WPP was hit hard in 2020 as businesses cut their advertising budgets. For the year, revenue fell 7.3% while profit before tax declined 24%.
However, the outlook for WPP appears to be improving. In the company’s full-year 2020 results, it advised that it had recently secured a "market-leading" $4.4 billion of net new business from companies such as Alibaba, HSBC, Intel, Uber and Unilever, and reiterated its guidance for 2021 of a mid-single digit rise in underlying net sales, returning to growth in the second quarter. As a result of its Q4 performance, the company relaunched its share buyback program.
“We see many areas of attractive growth for WPP, from the permanent shift to ecommerce, the digitization of media and the need from our clients to convert brand purpose into action. The demand from clients for simple, integrated solutions that combine outstanding creativity with sophisticated data and technology capability is only set to grow and, while uncertainties remain around the impact of the vaccine roll-out and economic growth, we continue to expect 2021 to be a year of solid recovery," said CEO Mark Read.
In light of the improving outlook, we see the large insider purchase from the CFO as a bullish signal.