Insider: blue-chip directors eye more progress

Two of this summer’s strongest FTSE 100 stocks have been given more boardroom support, while there’s also been buying at a high-yielding small-cap.

2nd September 2024 08:59

by Graeme Evans from interactive investor

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Top-performing FTSE 100 stocks Bunzl (LSE:BNZL) and Rolls-Royce Holdings (LSE:RR.) have been backed to continue their momentum after two directors spent £100,000 on shares at near record prices.

Bunzl non-executive director Jacky Simmonds made her £50,000 investment after the workplace supplier’s strong half-year results sent shares up 8% to a new all-time high.

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Rolls-Royce’s Wendy Mars spent the same sum on the engine giant’s shares on Wednesday, increasing her stake at a price 7p short of the record 503p seen on 15 August.

The former president of Cisco’s EMEA region has been a director since December 2021, joining a year after the company’s £2 billion rights issue and when shares were 131.8p.

They closed on Friday at 496.4p, an increase of 10% since chief executive Tufan Erginbilgic announced the board’s intention to restore dividends with next year’s annual results.

Half-year figures on 1 August also lifted 2024 profit and cash flow guidance amid Erginbilgic’s “relentless focus” on commercial optimisation and cost efficiencies.

The strong report prompted UBS and Bank of America to lift their price targets to 640p and 675p respectively, with both firms flagging the possibility that Rolls will finish 2025 near to the bottom end of its 2027 cash flow guidance.

The Swiss bank said: “Our conviction in the Rolls-Royce investment story remains high.”

The performance of Bunzl shares has been just as strong over the past month after the FTSE 100 company last week upgraded full-year guidance and committed £700 million a year towards further value-accretive acquisitions up until 2027.

Shares closed the week at 3,540p, up 24% over the past year.

Fuelled by £2.9 billion of free cash flow between 2019 and 2023, it has launched a £250 million share buyback and pledged to consider another £200 million at full-year results.

The business, which supports customers with essential not-for-sale products and services across a range of sectors, is reaping the benefits of its margin and deal-making progress.

Deutsche Bank upgraded its earnings forecasts by 3-4% following the results and said an active pipeline of acquisitions positioned the company for further upside.

It lifted its price target to 3,400p but stopped short of a Buy recommendation, as did JP Morgan despite an improved estimate of 3,660p. Shore Capital’s fair value estimate of Bunzl shares continues to be 3,700p, based on cash generation and its view on the quality of the group’s operations and long-term record.

Peel Hunt raised its price target to 3,500p due to margin momentum and increased visibility but said there may be better entry points for investors.

It added: “Management has performed well and we believe Bunzl remains in a good position to deliver long-term, attractive shareholder returns.

“However, in our view, the shares trading on 17.2 times 2025 earnings look up with current events, with a future re-rating more likely to be influenced by stronger underlying revenue growth and investor confidence in the pace of bolt-on M&A.”

Simmonds, who bought her shares on Thursday at 3,462p, is the former chief people officer at Nasdaq-listed digital services company Veon. She joined the Bunzl board in March 2023.

The UK motor stock to own?

The high-yielding shares of small-cap Sabre Insurance Group (LSE:SBRE) have been bought by one of its directors in his second investment of the past three months.

The motor insurer’s senior independent director Bryan Joseph spent £50,000 at a price of 151.7p, having also picked up £25,000 of Sabre shares at 163.5p in June.

His latest purchase followed July’s interim results, when Sabre posted significant top-line and profit growth after hiking prices to cover forward-looking claims inflation of about 10%.

The company, which sells policies through brokers and the brands Go Girl and Insure 2 Drive, rebuilt its margin to 18% and reported continued strong capital generation.

Peel Hunt sees further margin improvement in the second half: “This should provide the capital flexibility to invest in the business and pay an attractive dividend.”

A dividend of 1.7p a share is due on 25 September, part of Sabre’s policy to pay a third of the previous year’s award and to consider additional distributions at the full-year stage. Based on Peel Hunt’s forecasts, the shares trade with a projected yield of 6.8% that rises to 8.4% in 2025.

Lifting its price target to 215p, the broker added: “In our view, Sabre remains the UK motor stock to own.” Shares closed last week at 155.8p.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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