Cluster buying is one of the most bullish signals in insider transaction analysis. This is where multiple insiders are buying company stock simultaneously.
In this report, we are going to highlight some cluster buying at HomeStreet Inc (HMST:US). HomeStreet is a financial services company that operates primarily in the western United States, including Hawaii, through subsidiaries HomeStreet Bank and HomeStreet Capital Corporation. Its main activities are real estate lending, mortgage banking, and commercial and consumer banking. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $852.5 million.
HomeStreet Inc: Insider Buying
Our data shows that on 3 August, three insiders at HomeStreet bought stock. Those who purchased shares were:
- CFO John Michel (8,000 shares)
- Independent Director Douglas Smith (10,117 shares)
- Independent Director Mark Patterson (2,000 shares)
Combined, these insiders spent around $766,000 on stock.
Bullish Trading Activity
There are a few things that stand out about this cluster buying activity.
Firstly, all three insiders have made substantial purchases. This suggests they are confident the stock is set to move higher. It’s worth noting that Michel’s purchase increased the size of his holding by 28%.
Secondly, two of the insiders involved in the cluster activity, Michel and Patterson, have made well-timed purchases in the recent past. Patterson, for example, bought stock in June last year when it was trading near $23. Since then, the stock has risen to $40.
Third, Patterson has an investment management background. Previously, he served as Managing Director and Equity Analyst of NWQ Investment Management Co., LLC, an investment management company, from 1997 until his retirement in 2014. At NWQ, he conducted fundamental research and valuation analysis of public companies within the financial services sector.
Solid Q2 Results
HomeStreet recently posted a solid set of second-quarter results. For the period, net income amounted to $29.2 million versus $20.2 million in Q2 2020 with net income per share coming in at $1.37 versus $0.86 in Q2 2020. Return on equity was 16.3% versus 10.9% in Q2 2020. Loan portfolio originations totaled $912 million, up 19% year on year.
“Our second quarter results continued our outstanding start to 2021,” commented CEO and President Mark Mason. “Each of our lines of business continues to meet or exceed our expectations and the strong credit quality of our loan portfolio continues to improve,” he added.
On the back of these strong results, the company announced a $15 million expansion of its share repurchase program along with a common stock dividend of $0.25 per share.
In light of these developments, we see the cluster buying here as a bullish indicator.