Insiders at Famous Brands Sold 1,390,444 shares since January 04th 2015: Should you be worried?

2015-02-20 03:48

Johannesburg—Sunburst Africa—Insiders at famous brands Ltd (JSE Code: FBR) have within a period of just over a month sold 1,390444 shares worth over 130 million rands of the company since the beginning of 2015. Famous Brands Ltd. is Africa’s leading Quick Service and Casual Dining Restaurant franchisor which also has representation in the United Kingdom. The global footprint of the Group now stands at 2 163 franchised restaurants spread across South Africa, 15 other African countries and the United Kingdom. Its brand portfolio includes Steers, Wimpy, Debonairs Pizza, Mugg & Bean, FishAways, Longhorn, House of Coffees, Coffee Couture, Brazilian CafT, tashas, KEG, McGinty’s, O’Hagan’s, Giramundo, Vovo Telo, Milky Lane, Juicy Lucy, The Brewers Guild, Blacksteer and Blacksteer Home of Shisanyama. The Group manufactures and supplies its franchisees, the retail trade and broader hospitality industry with a wide range of meat, sauces, bakery, ice-cream, fruit juice and mineral water products. Why did insiders sell over a million shares of famous brands within a month?

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It isn’t a coincidence that corporate executives seem to always buy and sell at the right times. These insiders have access to all important company information that ordinary investors may ever want to have. However, these purchases or sales by insiders are always made public for you and me to see. The legal practice of buying and selling huge quantities of company shares have implications for ordinary investors like you and I. what can we make from the recent sale of 1,390,444 shares of famous brands by insiders?

It is clear from this action that these insiders have access to some information that we as ordinary investors don’t have. According to investment guru peter Lynch “insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” Following from this one may speculate that insiders at famous brands may be of the view that the shares may not perform well over the next six months or simply have seen other lucrative investment opportunities. This view has been supported by research from Michigan State University which showed that when executives bought shares in their own companies, the stock tended to outperform the total market by 8.9% over the next 12 months. Conversely when they sold shares, the stock underperformed the market by 5.4%.

Famous brands remains a profitable company with Revenue up 14% to R1.57 billion, Operating profit up 19% to R303 million, Headline earning per share up 18% to 212 cents per share, Dividends per share up 19% to 155 cents per share, Earning per share up 18% to 212 cents per share, Net asset value per share up 16% to 1 306 cents per share, according to the company results for the last financial period

Therefore investors interested in famous brands may want to do more than due diligence on the company to get more insight into what insiders may know that we don’t know before making any further buy or sell decision on the company.

We will keep watching famous brands and update in subsequent articles

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