One of the most bullish insider trading patterns is what’s known as ‘cluster buying.’ This is where three or more insiders have purchased company stock within a short period of time.
In this report, we are going to highlight cluster buying activity at Bergman & Beving AB (BERGB:SS). Bergman & Beving is a Swedish supplier of consumables and components to the industrial and construction sectors in the Nordic region. Its products include hand tools, metal and woodworking machinery, compressed air technology, personal protective equipment, fastening elements, screws, electrical devices, and more. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 4.1 billion.
Bergman & Beving Aktiebolag: Insider Buying
Our data shows that between October 21 and October 22, four insiders at Bergman & Beving Aktiebolag, including President & CEO Magnus Soderlind and CFO Peter Schoen, purchased stock near the SEK 150 level.
In total, the four insiders bought 71,500 shares, spending nearly SEK 11 million (approx. USD $1.3 million) on stock. The largest purchase was from Soderlind who acquired 62,000 shares at a price of SEK 151.41 per share.
Bullish Cluster Purchase
This cluster purchase looks quite bullish, in our view.
For a start, it contains purchases from several top-level insiders. Insiders such as President & CEO Magnus Soderlind and CFO Peter Schoen are likely to have deep insight into Bergman & Beving Aktiebolag’s operations and performance. It’s worth noting that both the CEO and CFO have made well-timed purchases in the recent past. Schoen, for example, picked up stock in June when it was trading near SEK 130. Since then, it has risen as high as SEK 183.
Secondly, several of the insiders have increased the size of their positions significantly. Soderlind’s purchase, for example, has increased the size of his position from 200,000 shares to 262,000 shares. The fact that the insider has boosted his stake by 31% suggests that he is very confident the stock is set to move higher.
25% Increase in Net Profit
Bergman & Beving Aktiebolag’s recent Q2 results, posted on October 20, were solid.
While revenue was flat year on year at SEK 1,014 million, EBITA increased by 23% to SEK 81 million with EBITA margin rising to 8.0% from 6.5% a year earlier. Net profit was up 25% to SEK 50 million while EPS came in at SEK 1.85 (Q2 2020: 1.45) after dilution.
The company noted that it enjoyed a significant organic increase in earnings and those previously acquired companies were developing according to plan and made a positive contribution to the result for the quarter.
“The Group’s positive performance continued during the second quarter of the financial year, and we delivered our highest quarterly earnings and operating margin since the split in 2017,” commented President & CEO Magnus Soderlind.
Looking ahead, management was confident in relation to the outlook. “There is further potential in all divisions, and demand in our main markets is expected to remain favorable. Along with our initiated improvement programs, this gives me great confidence in our future, even though ongoing disruptions in supply chains and longer delivery times could impact the business situation" said Mr. Soderlind. “I believe that we have a strong management team in place who have what it takes to deliver on our ambition to double our operating profit within four to five years,” he added.
In light of these results, and the confident tone from management, we see the insider buying here as a bullish indicator.