If multiple insiders at the same organization are buying company stock simultaneously, it’s often worth taking a closer look. This buying pattern – which is known as ‘cluster buying’ – is a particularly strong insider trading signal.
In this report, we are going to highlight a recent cluster buying pattern at Arjo AB (ARJOB:SS). Arjo is a Swedish medical technology company that supplies products, services, and solutions for people with reduced mobility and age-related health challenges. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 10.9 billion.
Insider buying at Arjo AB
Our insider transaction data shows that between October 28 and November 1, four insiders at Arjo bought stock. Those who purchased shares were:
President & CEO Joacim Lindoff (50,000 shares @ SEK 42.25 per share)
Chairman Johan Malmquist (50,000 shares @ SEK 42.56 per share)
Chief Strategy Officer Christian Stentoft (71,452 shares @ SEK 41.90 per share)
Independent Director Eva Elmstedt (5,000 shares @ SEK 45.11 per share)
Combined, these insiders spent around SEK 7.45 million (approx. USD $680,000) on Arjo stock.
There are a couple of things that stand out here.
One is that several top-level insiders have made substantial purchases. Top-tier insiders tend to have the best understanding of their companies’ prospects.
Another is that all four insiders have significantly increased the size of their holdings. The CEO and Chairman, for example, have increased the size of their holdings by 45% and 33% respectively. This suggests that they are confident the stock is set to move higher.
Arjo is experiencing some challenges right now and this is reflected in its share price.
For the third quarter, organic sales growth was just 0.3%. Meanwhile, gross margin fell to 40.6% from 46% a year earlier. The company attributed the poor performance to issues in the US, including extensive healthcare staff shortages, an uncertain economic climate for healthcare providers, lower DVT sales, a slower implementation pace of awarded rental contracts, and higher material and logistics costs.
However, management stressed that it expects healthy growth in the coming years (organic sales growth of 3-5% between 2023 and 2025) and a continuing long-term improvement in profitability. It added that interest in solutions and technologies that can improve outcomes and increase efficiency within healthcare remains very high among its customers.
“The need for healthcare globally continues to grow, despite short-term challenges in the world. Offering more people high-quality care using fewer resources has perhaps never been as important as it is now, which means that our long-term strategy is more relevant than ever,” said Mr. Lindoff.
Clearly, the insiders here believe that growth will bounce back. We see the insider buying as a bullish indicator.