One of the most bullish signals in insider transaction analysis is ‘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 some recent cluster buying at Freshpet Inc (FRPT:US). Freshpet is an American pet food company that specializes in fresh food for dogs and cats. Its mission is to improve the lives of pets through the power of fresh, natural food that is packed with vitamins and proteins. The company is listed on the NASDAQ Global Market and currently has a market capitalization of $4.6 billion.
Freshpet Inc: Insider Buying
Our insider transaction data shows that between November 24 and November 29, three insiders at Freshpet bought stock. Those who picked up shares were:
- Chairman Charles Norris (5,000 shares @ $110.03 per share)
- CEO William Cyr (1,819 shares @ $109.91 per share)
- Board member Walter George (1,000 shares @ $107.96 per share)
Combined, these three insiders spent about $860,000 on Freshpet stock.
This cluster buying pattern caught our attention due to the fact that it contains purchases from two top-level insiders – the CEO and the Chairman. These insiders are likely to have deep insight into the company’s operations and performance. Both have been at the company for long time – Mr. Norris has served as Chairman since 2006 while Mr. Cyr has served as CEO since 2016.
It’s worth noting that Mr. Cyr has made well-timed buys here in the past. In 2017, he bought a substantial amount of stock when it was trading between $10 to $15. Since then, the stock has risen as high as $187.
Supply Chain Challenges
Freshpet’s recent Q3 results showed that the company is suffering from supply chain challenges at present.
While revenue for the quarter was up 28% year on year to $107.59 million, it was below the consensus forecast of $115.46 million. Meanwhile, higher selling, general, and administrative (SG&A) expenses during the period resulted in a net loss of $2.1 million versus net income of $3.5 million a year earlier.
On the back of these disappointing results, the share price took a significant hit.
However, management believes that the long-term growth story here is still intact.
"Despite unprecedented supply chain challenges, Freshpet's long-term growth model remains intact," commented Mr. Cyr. “The long-term trends driving Freshpet's growth remain strong, and - thanks to our aggressive capacity expansion initiatives and the investments we made in maintenance, training and automation in Q3 -- we have never been better positioned to fulfill our mission of 'changing the way people nourish their pets forever' than we are today," he added.
The cluster buying activity here suggests that insiders are genuinely confident about the future and expect the stock to bounce back. We view this insider buying as a bullish indicator.