One of the most bullish insider transaction patterns is ‘cluster buying.’ This is where three or more insiders have purchased company stock within a short period of time.
Here, we are going to highlight some recent cluster buying at Redrow PLC (RDW:LN). Redrow is a house builder that operates throughout the United Kingdom. It is one of the largest British housebuilders, with a network of 14 operational divisions across the UK. The company is listed on the London Stock Exchange and currently has a market capitalization of $2.53 billion.
Redrow PLC: Insider Buying
Our insider transaction data shows that between February 10 and February 11, three insiders at Redrow bought stock. Those who bought shares were:
- Chairman of the Board Richard Akers (20,000 shares @ $8.08 per share)
- Non-Executive Director Nicola Dulieu (6,500 shares @ $8.28 per share)
- Senior Independent Non-Executive Director Nick Hewson (2,477 shares @ $8.32 per share)
In total, the three insiders spent USD $246,238 on Redrow stock.
Bullish Cluster Buying
These insider trades are worth highlighting for a few reasons.
The first is that all of the insiders buying stock either have a background within the property industry or they have a financial background.
Mr. Akers has been in the property industry throughout his career and was a director at Land Securities where he oversaw their retail portfolio. He sat on the board of Barratt Developments for nine years and currently holds non-executive roles at Unite Group and Shaftesbury.
Mr. Hewson has been on the Redrow Board for close to ten years and is a qualified Chartered Accountant. Mr. Tant was CFO of Imperial Brands and held many senior roles at KPMG, and Nicola Dulieu was at Marks & Spencer for close to thirty years and is a trained accountant. This suggests the insiders are well qualified to make an accurate valuation of Redrow.
Another reason that we are interested in these trades is that our insider transaction data shows that this is the first insider buying at the company since June last year. It is interesting that four insiders have chosen to buy stock in such close proximity to each other.
Additionally, Mr. Akers has increased his holding by close to 70%, which suggests he is very confident that the share price will move up from its current levels.
Record H1 Revenue Levels
Redrow recently posted strong H1 2022 results in which revenue amounted to a record £1.05 billion.
As house price inflation exceeded build cost inflation, operating margins returned to normalized levels earlier than expected. For H1 2022, operating margin was 19.5% versus 17.1% the year prior. Profit before tax of £203 million was ahead of the £174 million that was achieved in H1 2021.
During the period, the company made good progress in the land market adding 3,316 plots to the current land portfolio, and 2,945 plots to the future land portfolio.
On the back of this performance, the company tweaked its 2024 guidance upwards due to a more optimistic outlook.
“We have made a positive start to the second half and are delivering against our strategy. With the ongoing popularity of our Heritage collection, strong land bank, and commitment of our teams across the country, I am confident the business will deliver further progress in the second half," said Group Chief Executive, Matthew Pratt.
Having looked through these impressive H1 results and picked up on the optimistic tone of the outlook for the business, we see the cluster buying at Redrow as bullish. The recent insider buying suggests the Chief Executive’s confidence is shared by others within the company, and that they feel the shares are undervalued by the market.