Insider: bosses buy low at this City top pick

Senior leaders at Convatec Group have bought shares at prices rarely seen in the past four years after their bullish assessment of growth prospects failed to shake off sector-wide investor pessimism.

Chief executive Jonny Mason and finance boss Fiona Ryder made investments totalling £150,000 at just above 200p, which is below the 225p when the medical products firm listed in 2016.

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The pressure on the FTSE 100-listed shares follows the prolonged derating of the European MedTech sector, which has been driven by cost headwinds, uncertainty over US healthcare policy and rotation of capital towards AI stocks.

City firm Panmure Liberum, which has a price target of 310p, said it struggled to understand the performance of ConvaTec shares given the defensive nature of its revenues and strong track record of hitting expectations.

It noted that shares performed strongly each time ConvaTec updated the market at events such as annual results and April’s capital markets day - only to give up the gains on speculation and read-across to developments elsewhere in the sector.

The shares have continued to struggle even though the company issued an in-line trading update on 21 May, a month after it said the strongest pipeline of innovation in ConvaTec’s history underpinned an ambition of “accelerating sustainable and profitable growth”.

The company’s medium-term target of 6-8% annual organic revenue growth reflects a faster pace of growth across the categories of advanced wound, ostomy, continence and infusion care. It is aiming for an adjusted operating margin of 24-26%, compared with 2025’s 22.3%.

It is well placed to benefit from long-term structural growth trends, which include ageing populations and the rising prevalence of chronic conditions.

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Panmure Liberum’s view of ConvaTec as a “low-risk compounder” was highlighted at the capital markets day as the company said 95% of revenues were from treating chronic conditions.

Mason told investors in April: "ConvaTec delivers innovative medical solutions to improve the lives of millions of people living with chronic conditions.

“The opportunity for future growth is substantial. Our Accelerate strategy is how we will deliver the next chapter of ConvaTec’s exciting story.”

Last month’s trading update showed broad-based growth across the four categories, with product launches performing well and gaining share.

It is on track to deliver 5-7% organic revenue growth in the year although the performance is second-half weighted due to customer order phasing and as product launches build. Shares fell by as much as 7% following the update.

Despite the recent operational progress, analysts at Berenberg said ConvaTec’s valuation was “stubbornly low” based on a recent multiple of 11 times underlying earnings.

The bank, which has a target price of 340p, said in April: “We think this is too cheap for a company with accelerating organic growth, margin improvement and double-digit earnings growth in the medium term.”

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UBS also regards ConvaTec as one of its top picks of a sector that has “persistently derated” since mid-2022, leaving European Medtech at a significant discount to the wider market versus its historical average 46% premium since 2017.

UBS expects the sector to inflect in the second half of 2026, with faster than market sales and earnings per share growth into 2027 and 2028. The bank also views November’s US mid-term elections as a potential catalyst for bringing more generalist interest.

Mason, who joined ConvaTec in 2022 and was appointed CEO in November, bought his £100,000 of shares at a price of 201p on Wednesday. Ryder spent £50,000 on the same day.

Chairman has a nibble at FTSE 250 shares

A reassuring update by Greencore Group as it integrates major acquisition Bakkavor has been backed up by its board chair after he spent £68,000 on shares at close to the lowest price in a year.

Leslie Van de Walle, who joined the convenience foods supplier in December 2022 after previous roles at Danone, Cadbury Schweppes and United Biscuits, made his investment at 226.8p. The shares were 207p on Friday, down from more than 300p in February.

Having completed the £1.5 billion acquisition of Bakkavor on 16 January, Greencore said in Wednesday’s interim results that the integration is “progressing well and to plan”.

The FTSE 250-listed business continues to grow profitably after its half-year operating surplus lifted 15% on a pro forma basis to £73.3 million and revenues improved 3.2% on a year earlier.

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The company said volumes have held up well in a subdued market, including in the legacy Greencore business.

Peel Hunt maintained its price target of 300p following the results, noting that the shares are trading on 10.9 times the company’s forecast September 2027 earnings.

The City firm said: “We see Greencore as exceptionally well positioned following the Bakkavor acquisition. There are short-term headwinds, but we expect outperformance on synergy targets to more than offset these.”

It is at the bottom end of the company’s full-year profit guidance range of £227–241 million, which it said reflected tough comparatives and the fact that Food to Go is more exposed to macro events than other food segments.