If multiple insiders are buying company stock at the same time, it’s often worth taking a closer look at the stock. This buying pattern – which is known as ‘cluster buying’ – is a very strong insider trading signal.
In this report, we are going to highlight cluster buying at Elanco Animal Health Inc (ELAN:US). Elanco develops, manufactures, and markets health products for animals. Its products and services are supplied to farmers, veterinarians, and pet owners in more than 90 countries worldwide. The company is listed on the New York Stock Exchange and currently has a market capitalization of $15.0 billion.
Elanco Animal Health Inc: Insider Buying
Our insider transaction data shows that between 11 August and 16 August, three insiders at Elanco Animal Health bought stock. Those who bought shares were CEO Jeff Simmons, Chairman David Hoover, and board member Michael Harrington. Combined, the three insiders bought 29,850 ELAN shares, spending about $900,000 on the stock.
Bullish Cluster Buy
This cluster buy is worth highlighting for several reasons. Firstly, the three insiders have spent a substantial amount of money on stock. This suggests that they are very bullish on its prospects.
Secondly, the cluster buy involves two top-level insiders – the CEO and the Chairman. These insiders are likely to have a thorough understanding of the company and its prospects. It’s worth noting that CEO Jeff Simmons has been at the company for over 30 years.
Third, Chairman David Hoover has made a number of well-timed purchases in the recent past. He last bought stock in May when it was trading near $32. Since then, it has risen as high as $37.50.
Share Price Pullback
Elanco’s recent second-quarter results exceeded the company’s guidance, thanks to a strong performance in the company’s pet health business.
For the period, revenue came in at $1,279 million versus June guidance of $1,225 million to $1,255 million, while adjusted earnings per share came in at $0.28 versus June guidance of $0.22 to $0.27.
On the back of these results, the company increased its full-year revenue guidance for 2021.
"Elanco continues to deliver strong results, extending our track record of execution since acquiring Bayer Animal Health a year ago. Outperformance on both sides of our business allows us to raise 2021 revenue guidance for the third time, with full year growth exceeding our long-term growth algorithm,” said CEO Jeff Simmons. “We head into the back half of the year with confidence in our ability to drive sustainable double-digit adjusted EBITDA and adjusted EPS growth,” he added.
However, investors were unimpressed with the full-year 2021 guidance and the stock fell 7% after the results.
The buying from insiders suggests that they believe the stock will bounce back. We view the insider transaction activity here as a bullish indicator.