On August 22, Coty (COTY 16.59, +0.49, +3.1%), a manufacturer of fragrances and cosmetics, produced a disappointing fiscal fourth quarter earnings report. Its stock dropped 18% in the wake of that disappointment, but it is trading higher today in a down market thanks to reports of insider buying activity.
Specifically, it was disclosed in a Form 4 SEC filing that company CEO Camillo Pane purchased 48,485 shares on August 24 at a price of $16.50 per share.
In addition, Sylvie Moreau, President of the Professional Beauty division, bought 48,153 shares on August 24 at a price of $16.79 per share, while Robert S. Singer, a company director, bought 20,000 shares on August 24 at a weighted average price of $16.299 per share.
The timing of the purchases is little o coincidence. Coming shortly after the earnings disappointment, and the fallout in the stock, they are being viewed today as an encouraging indication of management's faith in the company's prospects.
To be sure, insiders have the best understanding of the company's outlook (or they should anyway), so it is often a confidence booster when insiders are spending a significant amount of their own money to buy the company's stock.
In the case of company CEO Camillo Pane, the expenditure on the latest share purchase was approximately $800,000.
Insider buying activity is of course no guarantee that there is nothing but stock gains ahead; nonetheless, it is something investors should hope to see in a downtrodden stock like COTY, which has fallen 40% over the last 52 weeks.
For today anyway, the reports of insider buying activity in COTY are being viewed as good news that is helping the stock rebound some from its difficulties.