If multiple insiders are buying company stock simultaneously, it’s often worth taking a closer look. This buying pattern – which is known as ‘cluster buying’ – is a particularly strong insider trading signal.
In this report, we are going to highlight cluster buying at Texas Capital Bancshares Inc (TCBI:US). Texas Capital Bancshares is a bank holding company, which through its subsidiary, Texas Capital Bank, provides various banking products and services for commercial businesses, professionals, and entrepreneurs. Headquartered in Dallas, it has full-service locations in the five largest metropolitan areas of Texas: Austin, Dallas, Fort Worth, Houston, and San Antonio. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $3.0 billion.
Texas Capital Bancshares Inc: Insider Buying
Our data shows that between October 22 and October 25, five insiders at Texas Capital Bancshares, including Chairman Larry Helm and CFO Julie Anderson, bought stock. In total, these five insiders bought 65,825 shares, spending just under $4 million on shares.
This insider activity comes after President and CEO Rob Holmes and Chief Risk Officer Tim Storms spent around $750k on TCBI stock in early September.
Bullish Cluster Buying
This cluster buying pattern is very bullish in our view.
For a start, the insiders have spent a considerable amount of money on stock. Our records show that this insider buying represents the largest amount of insider buying at TCBI within a quarter for several years. Our Insider Model views this buying activity as very positive.
Secondly, several top-level insiders have bought stock, including the President and CEO, the CFO, and the Chairman. These insiders are likely to have an excellent understanding of the company’s performance and prospects.
Third, the largest purchase ($2.1 million) was from Director Robert Stallings. Last year, Stallings – who is CEO of investment company Stallings Capital Group – made several well-timed purchases.
New Strategic Plan
In early September, Texas Capital Bancshares announced a new strategic plan. The new plan involves:
- Organizing around client delivery and investing in technology: the group plans to pursue one of the most aggressive hiring plans in the company’s history to more than double the number of client‐facing professionals across the state by 2025, and strategically allocate technology spend.
- Expanding products and services, including launching a broker‐dealer business: the company plans to invest in treasury solutions to give clients best‐in‐class solutions tailored to their specific needs and requirements.
- Enhancing accountability and maintaining financial resilience: the goal is to maintain a balance sheet and operating model structured to serve clients, access markets, and support communities through all cycles.
The company believes this new strategy will lead to more sustainable returns for investors.
“I am very pleased by the important actions taken this quarter,” said President and CEO Rob Holmes in the company’s Q3 results. “We have communicated a transformative vision for the future of our company which we believe will lead to higher quality, more sustainable earnings for our shareholders. I am encouraged by the support we have received thus far, and with a vastly improved balance sheet, a strengthening loan portfolio, and a highly motivated management team and employee base, we are focused on what needs to be done to become the flagship financial services firm headquartered in Texas.”
The cluster buying here suggests that insiders are confident the new strategy will deliver results. We see this insider transaction activity as a bullish indicator.