One of the strongest signals in insider transaction analysis is cluster buying. This is where multiple insiders are buying stock within a short space of time.
In this report, we are going to highlight some recent cluster buying activity at RWE AG (RWE:GR). RWE is a German energy company with a focus on renewables. It is currently the number two player in offshore wind power. The company is listed on Deutsche Börse’s Xetra and currently has a market capitalization of €24.2 billion.
RWE: Insider Buying
Our records show that between 21 January and 27 January, four members of RWE’s Supervisory Board and one member of the Executive Board purchased stock. Three other members of the Supervisory Board also bought stock between 8 January and 13 January. Overall, eight insiders purchased RWE stock throughout January. Combined, they bought around 6,300 shares spending roughly €225,000 on stock.
We see this cluster buying as bullish for a couple of reasons. Firstly, a large number of insiders have purchased stock within a short period of time. This tells us that there is a consensus of opinion within RWE that the stock is undervalued right now.
Secondly, past cluster buys here have turned out to be profitable insider transaction signals. For example, after multiple insiders purchased RWE stock in February 2019 near the €22 level, the stock rose to around €34 over the next 12 months.
RWE’s most recent results, posted in November, were very encouraging. For the quarter, adjusted EBITDA increased by 13% to €2.2 billion while adjusted EBIT was up 29% to €1.1 billion. Adjusted net income came in at €762 million.
On the operational front, RWE advised that it has continued to expand its renewables business recently. In the first three quarters of 2020, it commissioned about 500 megawatts (MW) of new wind and solar power plants, with about 800 MW more expected during the fourth quarter. It also said that it is currently involved in more than 30 hydrogen projects. CFO Markus Krebber stated that the group’s successful capital increase in the summer will enable it to accelerate its mid to long-term growth in renewables.
In light of this solid update, we see the cluster buying here as a bullish signal.