If multiple insiders have purchased company stock within a short period of time, investors should take note. This buying pattern – which is called ‘cluster buying’ – can be a strong indication that the stock is undervalued.
In this report, we are going to highlight some recent cluster buying at Thyssenkrupp AG (TKA:GR). Thyssenkrupp is an international group of companies consisting predominantly of independent industrial and technology businesses. Its business activities are bundled into six segments: Materials Services, Industrial Components, Automotive Technology, Steel Europe, Marine Systems, and Multi Tracks. The company is listed on Deutsche Börse’s Xetra and currently has a market capitalization of €5.4 billion.
Thyssenkrupp AG: Insider Buying
Our data shows that between February 11 and February 14, three insiders at Thyssenkrupp picked up stock at prices between €8.44 and €9.05 per share. Those who bought shares were:
- CEO Martina Merz (26,061 shares)
- CFO Klaus Keysberg (14,177 shares)
- CHRO Director Oliver Burkhard (32,622 shares)
Combined, these insiders spent around €635,000 (approx. USD $722,000) on TKA stock.
Bullish Cluster Buying
There are a couple of things that stand out about this cluster of purchases.
One is that all three insiders that have bought stock are members of the Executive Board and therefore top-level insiders. All three are likely to have deep insight into the company’s operating and financial activities. It’s worth noting that these trades represent the first buys from insiders since May 2019. This suggests that the insiders see considerable value in the stock right now.
Another is that the three insiders have all boosted their positions quite significantly with these trades. CEO Martina Merz, for example, has increased the size of her holding from 3,080 shares to 29,141 shares. This suggests the insiders are confident the stock is set to move higher.
Thyssenkrupp recently advised in a Q1 update that it had made a good start to its fiscal year.
For the first quarter of fiscal 2022, its group of companies posted order intake of €10.4 billion, an increase of 33% percent or €2.6 billion compared with the prior-year period. Meanwhile, sales for the period rose 23% to €9 billion. Adjusted EBIT for the period amounted to €378 million, well above the prior-year figure of €78 million and the figure of €232 million for the previous quarter.
Looking ahead, Thyssenkrupp confirmed its full-year forecast for the fiscal year. It also said that it expects a “substantial improvement” in adjusted EBIT for the year.
“We had a good first quarter. The turnaround at Thyssenkrupp is in full swing. We’ve made important progress in improving our performance and narrowing the focus of our portfolio,” commented CFO Klaus Keysberg.
In light of this update, we see the insider buying here as a bullish indicator.