2iQ Insider Brief: Supreme Cannabis(FIRE CN) Zooplus(ZO1 GR) Kinder Morgan (KMI US)

Kaloyan Kolev 11 February 2019

Supreme Cannabis Co Inc (FIRE: CN) 

12-month performance: +3%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors including Chairman
Recent news: Signed a supply agreement

 

Supreme Cannabis Company Inc, formerly known as Supreme Pharmaceuticals Inc, is a Canadian company that is focused on developing businesses in the cannabis market. The group’s 7ACRES venture – a 342,000 square foot greenhouse facility located in Kincardine, Ontario – is the only licensed producer focused on cultivating craft-quality cannabis at commercial scale. The stock is listed on the Toronto Venture Exchange and currently has a market capitalisation of CAD $648 million.

 

We last covered Supreme Cannabis only a few weeks ago on 23 January, after we noted that several top-level directors had recently purchased shares in the company. At the time, we stated that the outlook for the stock was “favourable” and that it had the “potential to keep rising” from its price of around CAD $1.70. Fast forward to today, and that call now looks pretty good, as the stock has surged approximately 30% in just over two weeks. So, is it too late to get in now or does Supreme’s uptrend have further to run?

 FIRE_CN

Source: 2iQ Research

Looking at insider transaction activity at Supreme Cannabis, there has actually been a substantial amount of further insider buying since our last report on the stock, which leads us to believe there could be further gains on the horizon. Since 21 January, seven separate directors have purchased shares in Supreme – including Chairman Michael La Brier who acquired 61,000 shares – which in our view, is an extremely bullish signal. With the company recently announcing that it has entered into another supply agreement, expanding its domestic distribution to eight provinces, we think the outlook for the stock remains favourable.

 

Zooplus (ZO1: GR)

 12-month performance: -31%
Insider activity: Bullish
Buying pattern: Purchases from CEO
Recent news: Reported a strong performance in 2018

 

Zooplus is a German pet supplies retailer that markets a vast selection of products through its online stores. Founded in 1999, the company ships to 30 countries across Europe and has around 6 million active customers. The stock is listed on the XETRA and currently has a market capitalisation of €780 million.

 

What we think is interesting about Zooplus is that CEO Cornelius Patt has an outstanding track record of timing his purchases and sales in the company well. As we explained in an article back in October, Patt has managed to generate substantial profits from his trading activity in Zooplus in recent years, by selling near the highs and then repurchasing stock at lower prices. For example, the key insider acquired 12,033 shares at prices of between €132 to €139 in October 2017, before offloading 7,649 shares in May 2018, as the share price rose above €180. Given Patt’s track record, we believe that a trading strategy that replicates his trading activity offers an attractive risk/reward profile.

 ZOOPLUS_

Source: 2iQ Research

Looking at insider transaction activity at Zooplus, we are interested to learn that Patt has been purchasing more shares in the company recently. After selling three tranches of shares at a price of around €180 in May last year, the CEO is now going long again and has recently acquired 3,087 shares at a price of around €107. We interpret this as a bullish signal. With the group recently reporting a 21% increase in sales for FY2018 and also advising that it enjoyed double-digit growth across all 30 regional markets during the year, we believe the stock has upside potential from current levels.

 

Kinder Morgan (KMI: US) 

12-month performance: +4%
Insider activity: Bullish
Buying pattern: Multiple purchases from Chairman
Recent news: Upbeat trading statement

 

Kinder Morgan is one of the largest energy infrastructure companies in North America. Operating approximately 84,000 miles of pipelines, the group transports natural gas, refined petroleum products, crude oil, and carbon dioxide across the US, and its customers include major oil companies, energy producers and shippers, local distribution companies and other businesses across a range of industries. The stock is listed on the New York Stock Exchange and currently has a market capitalisation of USD $39.3 billion.

 

After a pullback in the final quarter of 2018, shares in Kinder Morgan have performed well so far this year, rising over 15%. The stock has been boosted by rising oil prices, as well as an announcement in mid-January that quarterly profit from continuing operations more than doubled in the last quarter – on the back of an improved performance in the group’s pipeline and terminal business – and a subsequent price target upgrade from RBC.

 KINDER_MORGAN

Source: 2iQ Research

Looking at insider transaction activity at Kinder Morgan, we think the stock has the potential to keep climbing. This is due to the fact that Chairman Richard Kinder – who co-founded the company in 1997 – has recently purchased a significant quantity of stock, which we interpret as a positive development. Since late January, Kinder has spent over USD $17.5 million on stock to acquire a total of 965,260 shares. This is already around double what the key insider spent on Kinder Morgan shares in 2018, which suggests he sees upside at current levels. With profits rising and the co-founder of the group buying a substantial amount of stock, we think the outlook for Kinder Morgan shares is positive.

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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