Cluster buying is where three or more insiders purchase company stock within a short period of time. This is often a strong indication that insiders feel a stock is undervalued and there are potential trading profits. Below are three businesses that experienced significant insider buying clusters.
Exlservice Holdings Inc (EXLS:US)
Based in the US, Exlservice is an international analytics and digital solutions firm that works with organizations to improve operations and deliver business growth.
In March 2022, 2iQ reported on a cluster of insider buying at Exlservice. Within this cluster was:
- Business Head, Emerging Narasimha Kini (1,000 EXLS shares at $124.75 per share)
- CFO, Maurizio Nicolelli (1,200 EXLS shares at $124.50 per share)
- Chief Growth & Strategy Officer, Anita Mahon (1,150 EXLS shares at $138.05 per share)
- General Counsel and Corporate Secretary, Ajay Ayyappan (1,263 EXLS shares at $136.04 per share)
This cluster cost the insiders around $600,000 in total.
All members of this cluster were top level executives, which suggests they are likely to be knowledgeable about the company’s prospects and can see opportunities for growth.
Three of the four insiders also dramatically increased their holding percentages in Exlservice. CFO Maurizio Nicolelli, for example, boosted his holding in the company by 19%. This indicates that insiders are quite optimistic about the stock’s future performance.
In addition to the above, Exlservice recently estimated annual organic constant currency revenue growth of 11% to 13%, up from the midpoint of its prior target of 10% or more by around 200 basis points. These strong results imply this cluster is a bullish sign.
Alpha FX Group PLC (AFX:LN)
2iQ recently reported on cluster buying at Alpha FX, a financial services firm based in the United Kingdom that specializes in foreign exchange risk management and payment solutions. It supports over 600 organizations in over 30 countries across the world.
- Chairman, Clive Kahn (7,933 AFX shares at £17.50 per share)
- Non-Executive Director, Lisa Gordon (4,715 AFX shares at £17.30 per share)
- Independent Director, Vijay Thakrar (1,152 AFX shares at £17.33 per share)
In total, these insiders spent around £240,000 on AFX shares and this is the highest level of insider buying in a quarter since the business went public in 2017.
Secondly, each of the three insiders has a large amount of commercial expertise. Mr. Khan has over 30 years of expertise in financial services, including extensive knowledge of foreign exchange and payments.
This coincides with some strong 2021 results recently posted by Alpha FX, so our 2iQ analysts see this as bullish.
Redrow PLC (RDW:LN)
Staying in the UK, Redrow is a housebuilder with a network of 14 active divisions. 2iQ reported on a cluster of activity in February 2022:
- Chairman of the Board, Richard Akers (20,000 shares @ £6.193 per share)
- Non-Executive Director, Nicola Dulieu (6,500 shares @ £6.35 per share)
- Senior Independent Non-Executive Director, Nick Hewson (2,477 shares @ £6.376 per share)
In total this cluster amounted to $246,238. All of the insiders who purchased stock have a history in either the real estate or financial industries and this cluster is the company's first case of insider buying since June 2021. It's noteworthy that four insiders bought stock in such proximity to one another.
Mr. Akers boosted his holding in RDW by about 70%, indicating that he is confident that the stock price will rise from present levels. Strong H1 2022 results in light of house price inflation in the UK, as well the size of this cluster, can be seen as bullish.
For more reports on cluster buying, check out the following:
Read more cluster buying reports on the 2iQ blog.