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.
We reported on multiple cluster buying instances throughout September 2021 – here’s a roundup of four businesses that experienced insider buying clusters.
1. FMC Corp (FMC:US)
FMC is an agricultural sciences business based in the United States that manufactures chemicals to protect crops as well as the technology that allows the chemicals to be sprayed onto the land.
FMC is also traded on the Nasdaq Stock Exchange, currently with a market capitalization of $15.81 billion.
We reported on this cluster in late September:
- President and COO Mark Douglas (1,100 FMC shares)
- Director Carol Davidson (1,500 FMC shares)
- CFO Andrew Sandifer (1,260 FMC shares)
This cluster buying amounted to around $375,000 spent on FMC stock, with Carol Davidson increasing her holding by around 50%.
We think that the recent insider trading is encouraging based on these excellent results and signs of ongoing high demand for FMC's products. Despite the business's cost challenges, the three insiders think the company's stock is currently undervalued by the market and is a bullish signal.
2. Perenti Global Ltd (PRN:AU)
Perenti Global is a mining business that engages in the exploration and production of several commodities as well as providing mining industry support services across the world. We reported on their significant insider trades in early September:
- Chairman of the Board Robert Cole (100,000 RPN shares)
- Non-Executive Director Andrea Hall (27,500 RPN shares)
- Non-Executive Director Timothy Longstaff (100,000 RPN shares)
- Non-Executive Director Mark Hine (19,480 RPN shares)
These purchases cost the insiders around AUD $102,750, with three out of the four insiders increasing their holdings. The significance of these trades cannot be understated, with our attention drawn to a large number of trades in such a short period of time.
It sends a strong message to investors that Perenti Global's senior insiders are optimistic that the stock will rise in value in the future.
The company has seen an improved performance in the second half of the financial year ending June 30, 2021, with a statutory gain in H2 of $11.5 million from a loss of $63.8 million in H1. Following these encouraging results, we consider Perenti Global's recent insider trades to be bullish.
3. Embracer Group AB (EMBRACB:SS)
We turn to Sweden for our next business with Embracer, a video game developer that operates in 40 countries and has 80 internal game development studios. Saints Row, Goat Simulator, Dead Island, Darksiders, Metro, and World War Z are among the company's major gaming franchises.
Embracer experienced massive cluster buying from August into September. Eight different insiders purchased stock, the most notable were:
- Founder and CEO Lars Wingefors
- Chairman Kicki Wallje-Lund
- CFO Johan Ektstroem
The eight insiders involved with this cluster have amassed a significant stock portfolio, spending around USD $5.8 million on shares, indicating that they are highly confident in the stock's upward trajectory.
Amongst those eight investors were significant insiders such as the CEO and the CFO, who are privy to superior insight into the business’ operations and prospects.
Adjusted profits per share were SEK 2.30 in the first quarter of 2020, compared to SEK 1.51 at the same time the previous year. The sales and operating EBIT statistics also established new highs.
In light of these factors, as well as strong company performance, we see the cluster buying here as a bullish indicator.
4. SelectQuote Inc (SLQT:US)
SelectQuote is a direct-to-consumer comparison platform for auto insurance, home insurance, and senior health insurance.
It has a market value of $1.45 billion and is traded on the New York Stock Exchange.
In September we reported on SelectQuote’s significant insider trading:
- CEO Tim Danker (117,000 SLQT shares)
- CFO Raffaele Sadum (95,000 SLQT shares)
- COO Williak Grant (230,000 SLQT shares)
- Chief Revenue Officer Robert Grant (230,000 SLQT shares)
These trades are worth around $5.8 million – a notably high figure that clearly illustrates these top-level insiders’ confidence in SLQT stocks.
Their confidence in this stock is supported by solid company performance, despite an underwhelming performance in Q4. For the fiscal year, adjusted EBITDA was $228.0 million, up from $154.0 million the previous year.
CEO Tim Danker had this to say:
“We continue to have high conviction in our differentiated model and our ability to scale quality growth in 2022 and beyond. We believe that SelectQuote’s strong connection with our end customers creates differentiated value and we expect Population Health to strengthen that bond in the years to come”.
The insiders have a great deal of confidence that SLQT stock will bounce back in value despite recent underperformance, which we see as a bullish indicator.
There have been several other instances of cluster buying we reported on throughout September. To find out more about those reports, see below:
Read more insider trading reports on the 2iQ blog.