If multiple insiders are purchasing company stock, it can be a sign that the stock is undervalued. This buying pattern, which is called ‘cluster buying’, is one of the strongest signals in insider transaction analysis.
In this article, we are going to flag some recent cluster buying at Munich Re (MUV2:GR). Munich Re is a leading global provider of reinsurance, primary insurance, and insurance-related risk solutions. It is listed on Deutsche Börse’s Xetra and currently has a market capitalisation of €34 billion.
Munich Re: insider buying
Our records show that on 9 December, three top-level insiders purchased MUV2 stock. Those were bought shares were:
CFO Christoph Jurecka (3,000 shares)
CIO Nicholas Gartside (525 shares)
Management Board member Markus Riess (1,500 shares)
Combined, these insiders spent around €1.2 million on Munich Re stock.
This cluster buying is worth highlighting for a number of reasons. Firstly, all of these insiders are on the Management Board. This means that they are likely to have a good understanding of Munich Re’s recent performance and future prospects.
Secondly, the purchases are substantial. All three insiders have increased the size of their holdings significantly. Jurecka’s purchase, for example, has lifted his holding from 728 shares to 3,728 shares – an increase of more than 400%.
New medium-term goals
At its recent Investor Day, Munich Re announced that it is aiming to increase its return on equity to between 12% and 14% by 2025, up from a return of 9.2% in 2019. The company also said that it was targeting an annual rise in earnings per share and dividends per share of at least 5% on average by 2025. It advised that it would continue a shift away from coal, oil, and natural gas.
Analysts liked the company’s new business plan. Since the Investor Day, HSBC, Citigroup, and Jefferies have all raised their price targets for the stock. HSBC also upgraded the stock from ‘hold’ to ‘buy.’
In light of these developments, we see the insider buying here as bullish. It suggests that insiders are confident about the future.