Deutsche Bank

Insiders buying shares in beleaguered German companies

CIT Group Inc. Chief Executive Officer John Thain Interview
Who’s got a million? John Thain’s got a million (in Deutsche Bank shares). Source: Bloomberg

Deutsche Bank hasn’t just been out of favor with private investors for years, executives at Germany’s biggest financial institution have also been unwilling to put their own money behind the bank. For the past seven years, no company insider has spent more than €5,000 on Deutsche Bank shares, the threshold at which a purchase must be reported to Bafin, the country’s securities regulator. But why would they? The company’s stock plummeted around 60 percent in the same period.

That changed when two supervisory board members, John Thain and Mayree Clark, recently bought shares in a big way: Mr. Thain, a former Merrill Lynch head, broke a record by picking up €1.05 million in shares. “I have never seen such a large insider purchase at Deutsche Bank,” says Olaf Stotz, a professor at the private Uni Frankfurt School of Finance & Management. The professor has focused on insider trading for 15 years.

Meanwhile Ms. Clark, founder of US asset manager Eachwin Capital May, bought Deutsche Bank shares on the New York Stock Exchange for about €213,500. Both Mr. Thain and Ms. Clark bought the shares after Frankfurt-based Deutsche unveiled better-than-expected quarterly earnings that sparked a small share gain.

The buys are typical anti-cyclical purchases, says Mr. Stotz. Executives who know their companies better than anyone else and believe in the business’ progress often open their checkbooks after shares have suffered and appear to be cheap.

Gimme, gimme, gimme

Deutsche Bank execs aren’t the only ones hoping to make a bargain buy. Shares of Heidelberg Cement, the building supplies maker, have fallen 20 percent this year and hit a two-year low in mid-July. After forecasting rising profits for the year, CFO Lars Näger spent just under €208,000 on Heidelberger stock. That came after other board members spent nearly €802,000 on company stock, though they are underwater on paper.

Executives at forklift manufacturer Kion had been more cautious than their compatriots at Heidelberg Cement, with just one spending €71,000 in March. But new CFO Anke Groth, who moved to Kion in March, reported a purchase for just under €158,000. The purchase also seems antithetical since Kion shares have slipped about 20 percent since January.

And at conglomerate Siemens, board member Cedrik Neike shelled out just under €80,000 after the Munich-based company announced earlier this month that it would reorganize and form three largely independent companies from five divisions. The share price fell to its lowest level since the end of May. “Private investors should think more long-term and the group could benefit from the positive environment in the construction industry in the longer term,” says Mr. Stotz.

Mr. Stotz and Commerzbank Wealth Management use executive purchases to calculate the insider barometer for Handelsblatt. It calculates an average of the past three months of purchases. Since the beginning of July, the barometer oscillated around 130 points, indicating that equities should outperform other asset classes over the next three months. Specifically, according to Stotz, the insiders believe that the DAX 30 index of German blue-chip stocks will continue to move sideways in a broad range between 12,000 and 13,000 points.

Andrea Cünnen covers investing and bond markets for Handelsblatt. To reach the author: cuennen@handelsblatt.com.

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