Foolish investment22 Jun 2017 13:02
Interesting article in Fool today. Takes the shine off CEO's recent share purchase, pointing out the free shares he will get as part of his package, but very positive nevertheless. Article below.
"Follow the inside money?
Whitbread is already highly profitable. Management’s challenge is to ensure the group stays on track. But for Greg Fitzgerald, the new chief executive of Bovis Homes Group (LSE: BVS), the challenge is different.
Whereas rivals like Persimmon are generating operating profit margins of about 25%, Bovis only managed 15.2% last year. Worse still was that this was 2.1% lower than during the previous year. Mr Fitzgerald’s task is to solve the firm’s operational issues and close the profitability gap with key rivals.
He spent almost £2m on Bovis shares this week. That’s roughly three times his £650,000 annual salary — a decent-sized purchase. I believe this deal is a sign that he’s quietly confident of success.
Should you follow his example and buy Bovis? It’s worth remembering that his remuneration package includes an annual bonus of up to 100% of salary, payable in shares. These ‘free’ shares will lower the average purchase cost of his stockholding considerably, making positive returns far more likely.
Despite this, I’m optimistic. Mr Fitzgerald is highly regarded in the housebuilding sector and should be able to fix the firm’s problems. If he does, then I can see the shares returning to the 1,100p-plus level last seen in 2015. In the meantime, the dividend yield of 4.7% is worth having. Bovis remains a buy, in my view."