If multiple insiders are buying company stock, it’s often worth investigating the security further. This buying pattern – which is known as ‘cluster buying’ – is a particularly strong insider trading signal.
In this report, we are going to highlight cluster buying at Embracer Group AB (EMBRACB:SS). Embracer is a Swedish video game developer that operates in 40 countries and has 80 internal game development studios. The group has an extensive catalogue of game franchises, including Saints Row, Goat Simulator, Dead Island, Darksiders, Metro, MX vs ATV, Kingdoms of Amalur, TimeSplitters, Wreckfest, Insurgency, World War Z. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 104 billion.
Embracer Group: Insider Buying
Our data shows that between 18 August and 1 September, eight different insiders at Embracer Group purchased stock, including Founder and CEO Lars Wingefors, CFO Johan Ekstroem, and Chairman Kicki Wallje-Lund. Combined, these insiders picked up 262,500 shares, spending about USD $5.8 million on the stock.
Bullish Cluster Buying
This cluster of purchases looks interesting for several reasons. Firstly, it involves a number of top-level insiders. Insiders such as the CEO and the CFO are likely to have a superior level of insight into the company’s operations and near-term prospects.
Secondly, the eight insiders have spent a substantial amount of money on stock. The fact that they have spent nearly USD $6 million on shares suggests that they are very confident the stock is set to move higher.
Sales Growth of 66%
Embracer Group’s recent results for the quarter ended 30 June 2021 (Q1) showed that the group has strong momentum at present.
For the period, net sales were up 66% year on year to SEK 3,426.6 million while operational EBIT was up 79% to SEK 1,271.3 million. Adjusted earnings per share came in at SEK 2.30 versus SEK 1.51 in the same period in 2020. Both the sales and operational EBIT figures set new records.
“We are pleased with the organic year-over-year growth, given that the comparison is made against a quarter with a boost in demand due to pandemic effects. Our growth is supported by the wide back catalog and strong contribution from new releases, despite a difficult comparison with the first quarter last year that included a number of successful new releases,” commented CEO Lars Wingefors.
Looking ahead, the company said that it expects a strong pipeline of new releases in the second half of the year to be a key driver of accelerated organic growth. It added that it now has 180 games under development and that as a result, it is increasingly optimistic about its long-term organic growth prospects.
“Over the next few years, we are confident that our organic growth will continue to significantly exceed the overall gaming market expansion,” said Mr. Wingefors.
In light of this confidence from management, we see the cluster buying activity here as a bullish indicator.