Cluster buying – where multiple insiders are buying company stock within a short period of time – is a particularly powerful insider transaction signal. This pattern of insider buying can be a strong indication that the stock is undervalued.
Here, we are going to highlight some recent cluster buying at At Home Group Inc (HOME:US). At Home Group is a US-based home decor company that operates over 200 superstores in nearly 40 states. The company is listed on the New York Stock Exchange and currently has a market capitalization of $946 million.
At Home Group: insider buying
What has caught our attention here is a series of insider purchases between 21 September and 25 September. Form 4 filings show that over this period, three insiders – including Chairman and CEO Lewis Bird – at At Home Group purchased company stock. Combined, these insiders spent around $386,000 on HOME stock.
Source: 2iQ Research
Previous insider transactions were timed well
This pattern of cluster buying is worth highlighting for a couple of reasons. Firstly, the individual purchases are quite large on a relative basis. Bird’s purchase, for example, has increased the size of his position by 11%.
Secondly, the last time we saw a pattern of cluster buying here, in September last year, the stock rose around 20% over the next month. In other words, insiders timed their purchases well.
Good Q2 results
At Home Group issued an impressive set of second-quarter results in September.
For the quarter, net sales were up 50.5% on the same period last year to $515.2 million. Meanwhile, net income and earnings per share came in at $89.4 million and $1.39, well up on last year’s figures of $10.4 million and $0.16.
“We delivered the best quarter in the company’s history in terms of comparable store sales, profitability and free cash flow,” commented Chairman and CEO Lewis Bird. “We believe many of the key factors driving our strong performance have continued into the third quarter of fiscal 2020,” he added.
Putting this all together, we see the insider buying here as a bullish signal. It indicates that insiders are confident about the future and that they expect At Home Group stock to rise.