One of the most bullish insider transaction patterns is ‘cluster buying.’ This is where three or more insiders have purchased company stock within a short period of time.
In this report, we are going to highlight a cluster buying pattern at Uni-Select Inc (UNS:CN). Uni-Select is a Canadian company that is engaged in the distribution of automotive products. Operating in North America and the UK, it has 14 distribution centers and over 400 corporate stores. The company is listed on the Toronto Stock Exchange and currently has a market capitalization of CAD $1.15 billion.
Uni-Select Inc: Insider Buying
Our data shows that between May 13 and June 14, three top-level insiders at Uni-Select bought stock. Those who purchased shares were:
- Chairman and CEO Brian McManus (15,000 shares @ CAD $28.41 per share)
- CFO Antonio Pagano (2,900 shares @ CAD $29.07 per share)
- President and COO of Finishmaster Inc Mike Sylvester (9,000 shares @ CAD $28.26 per share)
Combined, the three insiders spent around CAD $700,000 on stock.
This cluster buying pattern is worth highlighting for several reasons. Firstly, all three individuals that have purchased stock are top-level insiders. These insiders are likely to have an intimate understanding of the business and its prospects. It’s worth noting that all bought stock in 2021 at lower levels.
Secondly, both the CEO and the CFO have experience in the investment world. Mr. McManus was previously a partner at Cafa Financial Corporation, a private investment bank headquartered in Montreal, until early 2021. Meanwhile, Mr. Pagano previously worked in investment banking at RBC Capital Markets. This means that these two insiders are likely to have an excellent understanding of the company’s intrinsic value.
Strong Q1 Results
Uni-Select recently posted strong results for the first quarter of 2021.
For the period, the group generated consolidated sales of CAD $409.6 million, up 10.7% year on year, with all three segments reporting positive organic growth. Meanwhile, adjusted net earnings amounted to CAD $21.2 million or $0.43 per diluted common share, an increase of $16.2 million or $0.31 per diluted common share year on year.
Uni-Select advised that during the quarter, it used its liquidity to make strategic investments to grow the business. While total net debt edged up, the group ended the period in a solid financial position with a leverage ratio of 2.02x, slightly lower than that of the previous quarter.
“We had a very strong start to the year with sales up 10.7% to $409.6 million, adjusted EBITDA up over 50% to $45.2 million and net earnings up to $7.7 million. These results reflect improvements in underlying demand, price increases, additional vendor rebates, the benefits generated from operational improvements implemented last year and significant savings on borrowing costs,” stated Mr. McManus.
Looking ahead, management was confident that the company can continue to grow, dispute supply chain and cost challenges.
“We still expect sales and profitability to improve in 2022, compared to 2021,” said Mr. McManus. “We are well-positioned to drive the business to the next level given the global market recovery, our healthy balance sheet and the dedication of our team,” he added.
In light of these results, we see the insider buying here as a bullish indicator.