Mondelez International, Inc., through its subsidiaries, manufactures and markets snack food and beverage products worldwide. Mondelez International’s insiders have invested more than 1 million shares in the large-cap stocks within the past three months. A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. However, these signals may not be enough to gain conviction on whether to invest. I’ve assessed two potential reasons behind the insiders’ latest motivation to buy more shares.See our latest analysis for Mondelez International
Which Insiders Are Buying?
Over the past three months, more shares have been bought than sold by Mondelez International’s’ insiders. In total, individual insiders own over 4 million shares in the business, which makes up around 0.29% of total shares outstanding. The entity that bought on the open market in the last three months was Trian Fund Management L.P.. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is Future Growth Outlook As Bullish?
Analysts’ expectations for earnings over the next 3 years of 34.86% provides a buoyant outlook going forward which is consistent with the signal company insiders are sending with their net buying activity. Probing further into annual growth rates,analysts anticipate a limited level of revenue growth next year, but a double-digit earnings growth at 12.07%. This may mean the company has effectively managed costs in order to pump up earnings growth. Net buying could signal high insider confidence, perhaps due to their belief of sustainable growth. Or they may simply see the current stock price is undervalued relative to intrinsic value.
Did Insiders Buy On Share Price Volatility?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. In the past three months, Mondelez International’s share price reached a high of $45.57 and a low of $37.57. This indicates some volatility with a share price change of of 21.29%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal portfolio rebalancing.
Mondelez International’s net buying tells us the stock is in favour with some insiders, which is fairly consistent with earnings growth expectations, even if the low share price volatility did not warrant exploiting any mispricing. However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. I’ve put together two essential aspects you should look at:
- Financial Health: Does Mondelez International have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Mondelez International? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!