As a secretive billionaire family accumulates COTY stock, a director buys and Morgan Stanley turns bullish

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Jab Holdings B.V. disclosed via Form 4 filings on August 28 buying over $32 million of Coty Inc. (NYSE:COTY) shares at prices ranging from $11.98 to $12.90 on August 24 through August 28.  Last December 31 JAB filed a 13G disclosing a 76% stake in the beauty company. Since filing the 13G at years end, JAB has acquired an additional 30 million shares of COTY spending nearly $83 million dollars.

That amount is pocket change for JAB which spent $2 billion in May buying English coffee and sandwich company Pret A Manger, and has reportedly spent over $30 billion in recent years building a stable of brands including Keurig Green Mountain, Panera Bread, Krispy Kreme Doughnuts and Peets Coffee.

The principal owners of JAB are four Luxembourg-based Reimann siblings — Wolfgang, Matthias, Stefan and Renate — who collectively have a fortune estimated by Forbes of $17.6 billion. The four, who are in their 50s and 60s, are reportedly so publicity-shy there are no photos beside their names on the Forbes list.

COTY Insider buying since May.

Filing Date Insider Title Transaction Trade Date Shares Avg. Price Total Holdings Start Holdings End
28-Aug-2018 Jab Cosmetics B.V. 10% Owner Purchase 28-Aug-2018 670000 12.9        8,642,930              292,038,016              292,708,000
28-Aug-2018 Jab Cosmetics B.V. 10% Owner Purchase 27-Aug-2018 900000 12.19      10,969,700              291,138,016              292,038,016
27-Aug-2018 Singer Robert S Director Purchase 27-Aug-2018 5000 12             60,000                     175,000                     180,000
28-Aug-2018 Jab Cosmetics B.V. 10% Owner Purchase 24-Aug-2018 1030000 11.98      12,339,500              290,107,968              291,137,984
27-Aug-2018 Singer Robert S Director Purchase 23-Aug-2018 20000 11.5           230,000                     155,000                     175,000
18-May-2018 Ramos Daniel E Chief Scientific Officer Purchase 15-May-2018 1700 14.08             23,936                     114,815                     116,515
18-May-2018 Ramos Daniel E Chief Scientific Officer Purchase 14-May-2018 25000 14.38           359,500                       89,815                     114,815
16-May-2018 Singer Robert S Director Purchase 11-May-2018 15000 14.12           211,770                     140,000                     155,000
18-May-2018 Ramos Daniel E Chief Scientific Officer Purchase 11-May-2018 20000 14.32           286,360                       69,815                       89,815

Source: WhaleWisdom.com

JAB disclosed its most recent COTY purchases after regular market hours on August 28. Earlier that day Morgan Stanley Analyst Dara Mohsenian upgraded Coty to Overweight from Equalweight and set a price target of US$14.50. Mohsenian, who had been negative on COTY for some time, said in a research note that he now views the risk-reward profile of the stock as compelling,

A week earlier, BMO Capital downgraded the stock to Market Perform on “downside risk” to Coty’s 2019 earnings per share outlook. Earlier this month, Bank of America Merrill Lynch cut its rating on the shares to Underperform from Buy, citing inconsistent execution and increasing disruption across the mass beauty segment.

Mohsenian acknowledged that he has historically been unconvinced about Coty’s long-term organic growth outlook, but now he believes the market has turned too bearish, placing too much focus on weak U.S./European Consumer Beauty results and not enough attention on strong Luxury/Professional performance.

Adding to the positive Coty news was a Form 4 disclosure by director Robert S. Singer on August 28th that he bought $270,000 of COTY at an average price of $11.60 on August 24 and 27. Singer, who has served as an executive and director at veteran of multiple major consumer companies, has been a director of COTY since 2010.  The recent COTY purchases represent his largest as a corporate insider.

COTY stock reacted to the developments by gapping 6% higher on August 28, touching 13.37, before closing at 12.71, up 4.7% on the day. Since then the stock has pulled back to $12.36 as of the August 31 close. A return to COTY’s 2018 highs of $21.60 would be a 76% move from here.