If multiple insiders are buying company stock investors should take note. This buying pattern – which is referred to as ‘cluster buying’ – is a particularly strong insider transaction signal.
In this report, we are going to highlight some cluster buying at Rheinmetall AG (RHM:GR). Rheinmetall is a German company that specialises in security and mobility solutions. The group’s Defence sector is Europe’s foremost supplier of army technology, while its Automotive sector is a first-tier supplier of modules and systems to the automotive industry. The company is listed on Deutsche Börse’s Xetra and currently has a market capitalisation of €3.6 billion.
Rheinmetall: insider buying
Our records show that between 7 December and 11 December, four insiders at Rheinmetall purchased stock near the €78 to €79 level. Those who bought shares included:
- CEO Armin Papperger (26,000 shares)
- CFO Helmut Merch (1,500 shares)
- Executive Board member Joerg Grotendorst (1,300 shares)
- Executive Board member Peter Krause (3,850 shares).
Combined, these insiders spent around €2.5 million on RHM stock.
This pattern of insider buying looks bullish for several reasons. Firstly, these are all top-level insiders. As members of Rheinmetall’s Executive board, they are likely to have a high level of information on the company.
Secondly, these insiders have spent a considerable sum of money on stock. Our records show that this buying activity represents the largest amount of insider buying at Rheinmetall within a quarter in over two years.
Third, insiders at Rheinmetall have timed their purchases well in the past. The last time we observed a significant amount of buying here was in mid-March. Since then, the share price has nearly doubled.
Rheinmetall recently posted an encouraging set of third-quarter results. In its Defence segment, the group reported a 12% increase in sales and a 48% increase in operating profit for the first nine months of the year. The group raised its operating margin guidance for the full year. Meanwhile, the Automotive segment – which was more impacted by Covid-19 – showed signs of a recovery with profitability returning in the third quarter. Management now anticipates a positive operating result in this segment for the year.
In light of these results, we see the cluster buying here as bullish. It suggests that insiders see value at current levels.