If multiple insiders have purchased company stock within a short period of time, investors should take note. This buying pattern – which is referred to as ‘cluster buying’ – can be a strong indication that a stock is undervalued.
Here, we are going to highlight a cluster buying pattern at Schaeffler AG (SHA:GR). Schaeffler is a leading global supplier to the automotive and industrial sectors. It is listed on the XETRA and currently has a market capitalization of €950 million.
Schaeffler AG: insider buying
Our records show that between 10 September and 29 September, five different insiders at Schaeffler purchased company stock. Those who bought stock included CEO Klaus Rosenfeld, CEO Industrial Stefan Spindler, CEO Automotive OEM Mattias Zink, and CTO Uwe Wagner. Combined, these insiders spent around €450,000 on Schaeffler stock in the space of a few weeks.
Source: 2iQ Research
Previous insider purchases were timed well
This pattern of cluster buying is significant for two reasons. Firstly, these are top-level insiders that have bought stock. These insiders are likely to have a high level of information in relation to the company’s operations.
Secondly, the last time we observed cluster buying at Schaeffler, in late March and early April this year, the stock rose around 30% in the next two months. In other words, previous insider purchases were timed very well.
Schaeffler recently announced that it is adopting additional structural measures to further transform the group and strengthen its competitiveness. It plans to reduce its workforce in Europe, and strengthen its sites in Herzogenaurach, Bühl, Schweinfurt, Langen, and Höchstadt by clustering technology and production capabilities and investing in future growth areas. It believes this will lead to potential annual savings of €250 million to €300 million.
The cluster buying we have seen recently here indicates that insiders have confidence in the company’s transformation plans. We see this insider buying as a bullish signal.