If multiple insiders are buying company stock simultaneously, investors should take note. This buying pattern – which is called ‘cluster buying’ – is a particularly strong insider trading signal.
In this report, we are going to highlight a cluster buying pattern at Ratos AB (RATOB:SS). Ratos is a Swedish private equity company that owns and develops unlisted medium-sized Nordic companies. Its objectives are to contribute to the long-term and sustainable business development of the companies it invests in and make value-generating transactions. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 16.2 billion.
Ratos AB: Insider Buying
Our data shows that on October 25, five insiders at Ratos purchased stock. Those who picked up shares were:
- CEO Jonas Wistrom (20,000 shares @ SEK 47.88 per share)
- CFO Jonas Agrup (10,000 shares @ SEK 48.22 per share)
- Chairman Per-Olof Soderberg (100,000 shares @ SEK 50.26 per share)
- Deputy Chairman Jan Soederberg (130,000 shares @ SEK 50.00 per share)
- Executive Vice President Anders Slettengren (10,000 shares @ SEK 48.07 per share)
In total, these insiders spent around SEK 13.5 million (approx. USD $1.6 million) on Ratos stock.
Bullish Cluster Buying Pattern
This cluster buying pattern looks quite bullish, in our view.
For a start, several top level insiders have purchased stock. Insiders such as CEO Jonas Wistrom and CFO Jonas Agrup are likely to have a superior level of information on the company and its performance. The fact that they are buying stock suggests that performance is strong and that they expect the stock to rise from here.
Secondly, previous cluster buying purchases here have turned out to be profitable trading signals. Back in November 2020, we highlighted the fact that multiple insiders at Ratos had bought stock when it was trading near SEK 30. Since then, the stock has climbed as high as SEK 64.
Ratos recently posted a mixed set of Q3 results.
On the positive side, the group said that EBITA across its businesses continued to improve despite challenges in the operating environment, including a shortage of materials. Half of its companies increased their EBITA by nearly 60% or more, and nine of 12 companies reported higher EBITA than in the year-earlier period. Meanwhile, the group completed two acquisitions during the quarter, which will add SEK 1 billion in sales on an annual basis.
However, on the negative side, profit was impacted by an unrealized loss of SEK 149 million related to the revaluation of shares in business data and analytics firm Dun & Bradstreet Holding Inc. For the period, profit amounted to SEK 60 million versus SEK 119 million a year earlier, although adjusted profit was much higher at SEK 208 million.
Looking ahead, management was confident about the future. “Ratos’s strategy is long-term and we are well positioned, both financially and in terms of expertise, to achieve or exceed our targets for 2025,” said CEO Jonas Wistrom. “We currently have approximately SEK 9 billion earmarked for acquisitions. We are thus entering an exciting period in Ratos’s development,” he added.
Putting this all together, we see the insider buying here as a bullish indicator. The cluster buying activity suggests that multiple insiders believe the shares will rise from here.