If multiple insiders have purchased company stock within a short period of time, investors should take note. This buying pattern – which is called ‘cluster buying’ – can be a strong indication that the stock is undervalued.
In this report, we are going to highlight some recent cluster buying at Orsted A/S (ORSTED:DC). Orsted is a Danish renewable energy company that is engaged in procuring, producing, distributing and trading energy and related products in Northwestern Europe. Since 2019, the company has been ranked as the world’s most sustainable energy company. It is listed on the OMX Nordic Exchange - Copenhagen and currently has a market capitalization of DKK 377 billion.
Orsted A/S: Insider Buying
Our data shows that between February 2 and February 23, five insiders at Orsted bought stock. Those who purchased shares included:
- Chairman Thomas Thune Anderson (450 shares @ DKK 671 per share)
- President and CEO Mads Nipper (1,699 shares @ DKK 677 per share)
- COO Richard Hunter (298 shares @ DKK 668 per share)
- Independent Director Dieter Wemmer (500 shares @ DKK 674 per share)
- Chief HR Officer Henriette Fenger Ellekrog (710 shares @ DKK 706 per share)
In total, the five insiders spent around DKK 2.5 million (approx. $380,000) on Orsted stock.
Bullish Cluster Buying
There are a couple of things that stand out about this cluster of purchases.
One is that several top-level insiders have bought stock. The Chairman, President and CEO, and COO are all likely to have deep insight into the company’s operations. The fact that these insiders are buying is bullish, in our view.
Another is that several of the insiders have increased the size of their holdings significantly. President and CEO Mads Nipper, for example, has increased the size of his holding by nearly 50%. Meanwhile, Chairman Thomas Thune Anderson has increased the size of his position by 82%. This suggests the insiders are very confident the stock is set to move higher.
8.7% Dividend Increase
Orsted recently posted a solid set of full-year results for 2021.
For the year, operating profit (EBITDA) totalled DKK 24.3 billion, an increase of DKK 6.2 billion compared to 2020, boosted by a gain of DKK 8.5 billion from the 50% farm-downs of Borssele 1 & 2 and Greater Changhua 1.
Meanwhile, return on capital employed (ROCE) amounted to 15%, versus 10% a year earlier. The group declared a dividend of DKK 12.5 per share for the period, up 8.7% year on year, and in line with its dividend policy.
“We successfully navigated the challenges during the year, and we have achieved significant results in 2021, both strategically, operationally, and financially,” commented President and CEO Mads Nipper.
Since these results, analysts at Barclays have upgraded the stock to ‘overweight’ from ‘underweight’ and raised their price target to DKK 900 from DKK 800. They expect the company's 2030 targets for 30GW offshore wind installation to be surpassed, and ROIC to remain above WACC.
In light of these results, we see the insider buying as a bullish indicator.