2iQ Insider Brief: Siemens AG (SIE:GR) Perrigo (PRGO:US) Johnson Controls International (JCI:US)

Robert Hable 16 November 2018
Siemens AG (SIE: GR)
12-month performance: -12%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CFO and Chairmen
Recent news: Announced new strategy

Siemens AG is a German conglomerate with a focus on electrification, automation and digitalisation. The company operates across a broad range of industries, including energy, healthcare and infrastructure. A global powerhouse, the group has operations in over 200 countries worldwide, and generated revenue of around €83 billion in 2017. The stock is listed on the XETRA and currently has a market capitalisation of €86 billion.

Since hitting an all-time high of €133 in April last year, Siemens shares have pulled back by almost 25% and currently change hands for just over €100. The shares have fallen this year on concerns over escalating trade tensions, lower profits, and general market weakness across Europe, and investors were also unimpressed with the group’s new ‘Vision 2020+’ strategy – designed to simplify the group – that was announced in August. Yet with the stock down 13% in the last six months and currently trading at a reasonable valuation, could now be the time to go long?


image1                    Source: 2iQ Research

Analysing recent insider transaction activity at Siemens, we are bullish on the outlook for the stock. This is due to the fact that earlier this week, a number of top-level directors all purchased shares in the company simultaneously. This included key figures such as CFO Ralf Thomas, who purchased 5,000 shares, Chairman of the Management Board Joe Kaeser, who acquired 10,464 shares, and Chairman of the Supervisory Board Jim Snabe, who bought 1,000 shares. Given that multiple insiders see value in the shares at current prices, we believe the stock has the potential to move higher.

Perrigo (PRGO: US)

12-month performance: -26%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including CEO
Recent news: New CEO
Perrigo is a global healthcare company focused on providing consumers with quality affordable healthcare products. The group is the world’s largest manufacturer of over-the-counter (OTC) healthcare products and is also a key supplier of infant formulas for the store brand market. The stock is listed on the New York Stock Exchange and currently has a market capitalisation of $8.6 billion.

Perrigo shares have lost nearly 60% of their value over the last three years. In 2015, the company saw off a $26 billion takeover offer from rival Mylan, yet promises made to investors at the time have failed to materialise as the market for generic drugs has been challenging and cost savings from past deals have not been delivered. The fact that the company has had three different CEOs this year already (and that current CEO Murray Kessler comes from the tobacco industry) most likely hasn’t helped sentiment. Yet with the shares down from a 2018 high of $95, to a price of just $63 today, could the stock offer turnaround potential?
image2                    Source: 2iQ Research

Insider transaction activity here this month certainly looks interesting. Since 9 November, we have seen five separate directors purchase shares in the company, including CEO Kessler, who spent one million dollars of his own money to acquire 15,683 shares. This purchase suggests that Kessler – who also worked at Campbell Soup and Clorox – is confident that he can turn things around and transform the company into a successful consumer goods company. As such, we think Perrigo shares are worth watching closely going forward.
Johnson Controls International (JCI: US)

12-month performance: -6%
Insider activity: Bearish
Selling pattern: Selling from multiple directors including CEO and CFO
Recent news: Sold power business for $13.2 billion

Johnson Controls International is a diversified technology and industrial company that serves customers in over 150 countries worldwide. The company has expertise across a broad range of areas, including efficient energy solutions, integrated infrastructure and next generation transportation systems. The stock is listed on the New York Stock Exchange and currently has a market capitalisation of $32 billion.

Shares in Johnson Controls have fallen approximately 12% since the beginning of September after several brokers have downgraded the stock. In September, JP Morgan downgraded the stock to ‘underweight’ from ‘neutral’, stating that it expects the company’s relative earnings revisions to remain subdued, while UBS also downgraded the stock to ‘neutral’ from ‘buy’, stating that the group’s margins could be under pressure. Yet Johnson Controls recently sold off its Power Solutions business to Brookfield Business Partners in a $13.2 billion deal, and it looks like it may use the proceeds to pay down debt and return cash to shareholders. Does this news enhance the appeal of the shares?


image3                   Source: 2iQ Research

Looking at recent insider transaction activity here, we are not bullish on the outlook for Johnson Controls at present. This is due to the fact that since June, we have observed consistent selling activity from CEO and Chairman George Oliver, who has registered eight separate disposals in this time, as well as sales from a number of other key insiders such as CFO Brian Steif. With multiple directors continuing to offload shares at lower share prices, we believe caution is warranted towards Johnson Controls shares at the moment. 



Disclaimer: Neither 2iQ Research GmbH nor its content providers are responsible for any damages or losses arising from any use of this information.

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