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JAB Holdings and Multiple Directors of Coty Purchase Shares – Insider Weekends

  • October 8, 2023

Key Insights:

  • Coty Inc. (COTY) is a company we added to our Premium Watchlist in November 2020, when the new CEO Sue Nabi joined the company, and some Directors were purchasing shares
  • Since Sue Nabi took the reins, Coty turned itself around – becoming profitable and consistently growing revenue year-over-year
  • Mexican billionaire Maria Asunicion Aramburuzabala was one of the Directors who purchased shares of Coty this week, which led us to take a closer look
  • JAB Holdings, the German consumer focused giant that has a large stake in Keurig Dr. Pepper (KDP), Krispy Kreme (DNUT), Panera and Peet’s also acquired $32.4 million worth of stock last week

On the list of the top insider purchases this week is a company that we’ve had our eye on for nearly three years. We first added the beauty company Coty Inc. (COTY) to our Premium Model Portfolio Watchlist in November 2020, back when the stock was trading at around $2.80 a share. The company was finally turning itself around after a long decline, and we wrote the following in an Insider Weekends article:

The insiders of Coty have been infamous for continuously buying shares even as the company delivered lousy performance and the stock declined from a high of over $32 in June 2015 to a low of $2.65 two months ago. This extreme drop was precipitated in part by revenue declining from $7.65 billion in fiscal 2017 (ended June 2017) to $4.72 billion in fiscal 2020. During this time net debt ballooned to $8.61 billion (March 2020) before settling down to $8.18 billion last quarter. Net income was negative in 8 out of the last 10 quarters.

These insider purchases however caught my eye because they were occurring even as the stock more than doubled off the September lows and a potential turnaround seems to be afoot. Investors were particularly pleased by results last quarter  when the company finally managed to report positive earnings of 24 cents per share, paid down debt and more importantly announced that the divestiture of its Professional and Retail hair business, which includes brands like Wella Professional and Clairol, was expected to close by the end of calendar 2020. Coty is spinning off this division in a $4.3 billion deal to the private equity firm KKR. The deal not only provides Coty with $2.5 billion in net cash proceeds to pay down debt, the company also gets to retain a 40% stake in this spinoff.

The company also has a new leader at the helm with Sue Y. Nabi taking on the role of CEO in September. Ms. Nabi was the CEO of L’Oréal Paris and served as Worldwide President of both L’Oréal, and Lancôme during her 20-year tenure at L’Oréal. Before joining Coty, she had launched a luxury skincare brand called Orveda. With Coty acquiring a 20% stake in Kim Kardashian West’s beauty products company, a 51% stake in Kylie Jenner’s makeup company  and hiring an entrepreneur minded CEO, the silver lining of a transformation appears to be stoking investor and insider enthusiasm for the company.

Given that the stock currently trades at over $10.55 a share, it is clear that the new CEO Sue Nabi has done a good job of turning the company around. In 2021, the company introduced a new strategic plan – which included selling a majority stake in Coty’s Professional and Retail Hair business, including the Wella, Clairol, OPI, and ghd brands.

Furthermore, the company expanded its digital marketing and its international presence – recently hosting the launch of Lancaster in China. As reported in their first-ever investors conference in Paris, Coty also has plans to explore a dual listing on the Paris Euronext – an understandable move, considering that Coty was originally founded in Paris, has a large European market, and CEO Sue Nabi is French.

As for this turnaround, in the last three years since Ms. Nabi took the reins, Coty has gone from being unprofitable to consistently growing both revenue and net income, as seen in the graph below:

Revenue Growth and Gross Income Growth of Coty, following Sue Nabi joining as CEO
Revenue Growth and Net Income Growth of Coty

In the fourth quarter of 2023 (ended June 30, 2023 for Coty), revenue grew by 17% and total revenue for the fiscal year 2023 rose by 5% to $5.55 billion. Net income also doubled to $508.2 million compared to income of $259.5 million in fiscal 2022. Coty has seen a lot of success in partnering with various brands, especially via licensing IP to develop fragrances, including with Marc Jacobs, Burberry, Gucci, and more.

How Coty partners with existing beauty brands
How Coty licenses and partners with beauty brands

As for the investors who purchased shares of Coty, one name, Maria Asunicion Aramburuzabala, stood out. Ms. Aramburuzabala joined Coty as a Director just a month after Sue Nabi took over as CEO, and is a famous Mexican billionaire. She is the President and CEO of the international investment firm Tresalia Capital, which specializes in consumer goods – which is a big portion of Coty’s business. While we definitely prefer to see management insider purchases, the last time Directors of Coty purchased stock, things turned out quite well.

Overall, we find Coty’s transformation to be a excellent example of the power of a new and experienced CEO who can turn a company around. Given that Coty currently dominates the beauty licensing business, it is likely that the company will continue to grow in the near future. We are excited about the company’s prospects and look forward to taking a closer look to see if it is a candidate for one of our spotlight ideas and inclusion in the model portfolio.

Welcome to edition 702 of Insider Weekends. Insider buying increased last week with insiders purchasing $56.46 million of stock compared to $50.48 million in the week prior. Selling decreased to $577.46 million compared to $828.01 million in the week prior.

Sell/Buy Ratio: The Insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio for last week dropped to 10.23. In other words, insiders sold more than 10 times as much stock as they purchased. This week, the Sell/Buy ratio was favorable, compared to the prior week when the ratio stood at 16.4.

Notable Insider Buys:

1. Asana, Inc. (ASAN): $17.07

President, CEO, & Chair Dustin A. Moskovitz acquired 1,015,000 shares of this work management platform, paying $17.53 per share for a total amount of $17.79 million. Mr. Moskovitz increased his stake by 2.23% to 46,626,868 shares with this purchase.

You can view the list of recent insider transactions for Asana, Inc. here.

P/E: -11.08Forward P/E: -63.22Industry P/E: 24.71
P/S: 6.18Price/Book: 11.22EV/EBITDA: -11.12
Market Cap: $3.75BAvg. Daily Volume: 2,533,55752 Week Range: $11.32 – $26.27

2. Coty Inc. (COTY): $10.55

Shares of this cosmetics company were acquired by 2 insiders:

  • Director Maria Asunicion Aramburuzabala acquired 500,000 shares, paying $10.80 per share for a total amount of $5.4 million. These shares were purchased indirectly by Parelia LP.
  • Director Isabelle Parize acquired 20,500 shares, paying $10.29 per share for a total amount of $210,945. Mr. Parize increased his stake by 56.59% to 56,725 shares with this purchase.

You can view the list of recent insider transactions for Coty Inc. here.

P/E: 18.51Forward P/E: 18.84Industry P/E: 19.87
P/S: 1.69Price/Book: 2.36EV/EBITDA: 13.97
Market Cap: $9.41BAvg. Daily Volume: 4,802,76852 Week Range: $6.19 – $13.46

3. MSP Recovery, Inc. (LIFW): $0.1833

Chief Legal Officer Frank Carlos Quesada acquired 6,868,132 shares of this healthcare recoveries and data analytics company, paying $0.22 per share for a total amount of $1.5 million. Mr. Quesada increased his stake by 4944.34% to 7,007,041 shares with this purchase.

You can view the list of recent insider transactions for MSP Recovery, Inc. here.

P/E: N/AForward P/E: 0.02Industry P/E: 28.09
P/S: 38.32Price/Book: 0.18EV/EBITDA: -22.75
Market Cap: $630.16MAvg. Daily Volume: 37,768,68152 Week Range: $0.043 – $1.74

4. NIKE, Inc. (NKE): $97.11

Director Robert Holmes Swan acquired 13,072 shares of Nike, paying $96.13 per share for a total amount of $1.26 million. Mr. Swan increased his stake by 264.99% to 18,005 shares with this purchase.

You can view the list of recent insider transactions for NIKE, Inc. here.

P/E: 29.97Forward P/E: 22.38Industry P/E: 15.01
P/S: 2.87Price/Book: 10.62EV/EBITDA: 22.53
Market Cap: $147.79BAvg. Daily Volume: 7,847,12052 Week Range: $85.07 – $131.31

5. Overstock.com, Inc. (OSTK): $17.46

Director Marcus Lemonis acquired 64,800 shares of this online home furnishing retailer, paying $15.30 per share for a total amount of $991,326.

You can view the list of recent insider transactions for Overstock.com, Inc. here.

P/E: -5.86Forward P/E: -15.05Industry P/E: 15.01
P/S: 0.47Price/Book: 1.38EV/EBITDA: 298.7
Market Cap: $789.25MAvg. Daily Volume: 2,322,22852 Week Range: $14.82 – $39.27

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Ares Management Corporation (ARES): $108.42

Shares of this asset management company were sold by 2 insiders:

  • Co-Founder & Chairman of PEG Bennett Rosenthal sold 100,000 shares for $102.00, generating $10.19 million from the sale. These shares were sold indirectly by BAR Holdings, LLC.
  • Co-Founder David B. Kaplan sold 100,000 shares for $101.98, generating $10.19 million from the sale. These shares were sold indirectly by Trently Holdings, LLC.

You can view the list of recent insider transactions for Ares Management Corporation here.

P/E: 63.78Forward P/E: 21.38Industry P/E: 9.30
P/S: 9.06Price/Book: 11.44EV/EBITDA: 28.61
Market Cap: $33.02BAvg. Daily Volume: 939,70352 Week Range: $58.6 – $109.575

2. The Trade Desk, Inc. (TTD): $82.15

President and CEO Jeffrey Terry Green sold 225,000 shares of this self-service cloud-based platform for $78.02, generating $17.55 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for The Trade Desk, Inc. here.

P/E: 315.96Forward P/E: 55.13Industry P/E: 16.09
P/S: 23.24Price/Book: 19.43EV/EBITDA: 180.1
Market Cap: $40.27BAvg. Daily Volume: 4,310,00652 Week Range: $39.43 – $91.85

3. FirstCash Holdings, Inc. (FCFS): $100.73

Director Douglas Richard Rippel sold 164,477 shares of this retail pawn store operator for $100.34, generating $16.5 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for FirstCash Holdings, Inc. here.

P/E: 20.19Forward P/E: 14.68Industry P/E: 9.30
P/S: 1.55Price/Book: 2.4EV/EBITDA: 7.49
Market Cap: $4.54BAvg. Daily Volume: 175,59052 Week Range: $75.48 – $105.68

4. Jabil Inc. (JBL): $129.95

Shares of this manufacturing services and solutions provider were sold by 5 insiders:

  • Executive Chairman Mark T. Mondello sold 60,000 shares for $127.56, generating $7.65 million from the sale.
  • Director Christopher S. Holland sold 16,300 shares for $127.37, generating $2.08 million from the sale.
  • Chief Executive Officer Kenneth S. Wilson sold 15,000 shares for $127.87, generating $1.92 million from the sale.
  • EVP, CEO, DMS Steven D. Borges sold 8,484 shares for $126.43, generating $1.07 million from the sale.
  • EVP, CEO, EMS Frederic E. Mccoy sold 8,000 shares for $126.48, generating $1.01 million from the sale.

You can view the list of recent insider transactions for Jabil Inc. here.

P/E: 21.59Forward P/E: 12.1Industry P/E: 24.71
P/S: 0.49Price/Book: 5.95EV/EBITDA: 7.3
Market Cap: $17.01BAvg. Daily Volume: 1,393,83452 Week Range: $55.36 – $131.84

5. Interactive Brokers Group, Inc. (IBKR): $89.67

Shares of this automated electronic broker were sold by 2 insiders:

  • Chief Financial Officer Paul Jonathan Brody sold 78,884 shares for $86.93, generating $6.86 million from the sale. These shares were sold indirectly by PJB Holdings LLC.
  • Chief Information Officer Thomas A. J. Frank sold 78,858 shares for $86.93, generating $6.85 million from the sale.

You can view the list of recent insider transactions for Interactive Brokers Group, Inc. here.

P/E: 31.61Forward P/E: 14.51Industry P/E: 9.30
P/S: 9.57Price/Book: 2.96EV/EBITDA: 20.33
Market Cap: $37.37BAvg. Daily Volume: 968,37352 Week Range: $66.89 – $95.59

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer:  I hold a long position in Atlassian (TEAM). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article