If multiple insiders are buying company stock, investors should pay attention. This buying pattern, which is known as ‘cluster buying’ is one of the strongest signals in insider trading analysis.
In this report, we are going to flag some cluster buying at Coty Inc (COTY:US). Coty is a American beauty company that specializes in cosmetics, skin care, fragrance, and hair care. The company is the global leader in fragrance, the second largest company for hair color and styling products, and the third largest company for color cosmetics. It is listed on the New York Stock Exchange and currently has a market capitalization of $5.5 billion.
Coty Inc: Insider Buying
Our records show that on 11 February, three insiders at Coty bought stock in a cluster buying pattern.
Those who bought shares were:
- Robert Singer – who joined the board of Coty in 2010 and was previously CFO of Gucci Group (75,000 shares @ $6.63 per share)
- Olivier Goudet – who is currently managing partner of JAB, a privately-held investment company (50,000 shares @ $6.86 per share)
- Isabell Parize – who was previously CEO of Douglas Holding SA, a German fragrance and cosmetics company, and CEO of Nocibe, a French fragrance and cosmetics retail company (15,225 shares @ $6.60 per share)
Combined, these insiders spent about $940,000 on stock.
This buying activity comes after a number of insiders, including the Chairman, bought Coty stock in November and December.
This cluster buying at Coty is significant for several reasons. Firstly, all three insiders have increased their holdings significantly. Our data shows that Parize’s purchase increased her holding by 152%. Singer and Goudet, meanwhile, increased their holdings by 20% and 8% respectively. This indicates that insiders are confident in relation to the outlook for the stock.
Secondly, these insiders are likely to have a good read on the industry and the group’s prospects. Singer has been on the board for over a decade so he is likely to know the company well. Parize has significant experience in the fragrance and cosmetics industries. Goudet, meanwhile, is an experienced businessman who is currently managing partner at a top global investment firm which has a large stake in Coty.
Coty posted a solid set of Q2 results earlier in February.
While revenue was down 16% year on year due to global lockdowns, adjusted operating income was up 7% on the same period last year to $188.4 million. The strong performance was fueled by fixed cost savings, which totaled $80 million. Coty said that due to the strong performance in H1, it now expects cost savings of $300 million this year, up from previous guidance of $200 million.
Encouragingly, Coty said that it continues to make progress on its strategic priorities, including digital and e-commerce acceleration (which grew 40% in Q2), expanding into white space opportunities such as prestige cosmetics and skincare, building out its presence in China, and strengthening its core prestige fragrance business and stabilizing share in the mass beauty business through leading innovation and improved execution.
"With revenues delivering on our objectives and profit, cash flow and debt all ahead of expectations, including 6% EBITDA growth, it is clear that a much stronger Coty is emerging, which we believe will weather any near-term market headwinds while simultaneously positioned strongly to capture the opportunities of the eventual global recovery,” commented Sue Y. Nabi, Coty's CEO.
“I am excited by the tremendous opportunities and exciting journey ahead for Coty, and look forward to sharing this vision in the coming months," she added.
Putting this all together, we see the insider buying here as a bullish signal. It suggests that insiders see Coty stock as undervalued at present.