Cluster buying is defined as three or more insider trades made in a short period of time. Investors should pay attention when a group of top-level insiders make large purchases within their own company. These shareholders are amongst the most proactive and informed within the market.
Four businesses have experienced significant insider buying clusters in August 2021.
1. FlatexDEGIRO AG (FTK:GR)
FlatexDEGIRO is a European FinTech specializing in transaction processing and securities trading. The company runs one of Europe's fastest-growing online brokerage businesses, with over 75 million paperless securities transactions completed each year.
Our analysts reported in early August on this insider trading:
- CFO John Michel (8,000 shares)
- Independent Director Douglas Smith (10,117 shares)
- Independent Director Mark Patterson (2,000 shares)
This cluster buying amounted to around €1.05 million spent on FTK stock and can certainly be identified as a bullish pattern.
This is bullish due to the cluster containing top-level insiders such as the CEO, CFO and Chairman. Furthermore, Mr. Niehage and Mr. Chahrour’s previously invested in FTK. They last spent around €250,000 on FTK when it was trading near €75, having risen since to highs of €119.
2. ENGIE SA (ENGI:FP)
French based renewable energy company, ENGIE, has been experiencing multiple insider trades and cluster buying throughout August. Those who purchased shares include:
• CEO Catherine MacGregor (15,000 shares)
• Chairman Jean-Pierre Clamadieu (10,000 shares)
• Executive Vice President Franck Demaille (2,500 shares)
• Executive Vice President Claire Waysand (5,000 shares)
In total, the insiders spent around €370,000 on ENGI stock. This round of cluster buying is worth highlighting because:
- The inside traders are top-level members of the company, and likely have superior information on the group’s prospects.
- All the stock purchased increased each insider’s holdings significantly. The CEO Catherine MacGregor, for instance, increased her holding by 100%, while Jean-Pierre Clamadieu increased his by 25%.
ENGIE posted strong H1 results, with revenue amounting to €31.3 billion, up from €27.4 billion in H1 2020.
We see the cluster buying here as bullish.
3. HomeStreet Inc (HMST:US)
HomeStreet is a western US based financial services company. It operates through various subsidiaries such as HomeStreet Bank and HomeStreet Capital Corporation, and provides real estate lending, mortgage banking, and commercial and consumer banking.
In August HomeStreet saw significant insider trading and cluster buying. The insiders were:
- COO Noel Abdayem(672,855 shares)
- Deputy CEO Simon Petren (6,250 shares)
- CFO Johan Lennartsson (1,000 shares)
There are several notable elements of this cluster buying activity. It’s important to note these insiders spent around $766,000 on HMST stock, which is a substantial amount that indicates their confidence.
Michel and Patterson, two of the insiders involved in the cluster activity, have recently made well-timed purchases. Patterson, for example, purchased stock when it was near $23 in June of last year. The stock has risen to $40 since then, and with this purchase Michel has increased his holdings by 28%.
Patterson has a background in investment management. From 1997 until his retirement in 2014, he was the Managing Director and Equity Analyst of NWQ Investment Management Co., LLC, an investment management firm.
In light of these factors, as well as strong company performance, we see the cluster buying here as a bullish indicator.
4. Global Payments Inc (GPN:US)
Global Payments is a leading payments technology company that serves customers all over the world with software and services.
Every year, the company serves over 3.5 million customers in 100 countries and processes nearly 60 billion transactions. The company has a market capitalization of $49.9 billion and is listed on the New York Stock Exchange.
Throughout August this company has seen substantial insider trading activity:
- CEO Jeff Sloan (2,946 shares)
- Director Joia Johnson (590 shares)
- Director Connie McDaniel (1,150 shares)
These trades are worth around $800,000, the largest amount of insider buying at Global Payments within a quarter for several years.
CEO Jeff Sloan also has over 25 years of experience in the financial technology industry, working most recently as head of the Financial Technology Group for Goldman Sachs.
Global Payments has recently undergone a strong second-quarter, increasing quarterly adjusted net revenues of 28% to $1.94 billion, while adjusted earnings per share rose 56% to $2.04. Mr. Sloan commented on the company’s success:
“Our business accelerated meaningfully in the second quarter of 2021, demonstrating significant ongoing momentum".
We see these insider’s buying as bullish.
Read more cluster buying reports on the 2iQ blog.
