When multiple insiders are simultaneously buying company stock, it’s often worth taking a closer look at the stock. This buying pattern – which is called ‘cluster buying’ – is a particularly bullish insider transaction signal.
In this report, we are going to highlight a cluster buying pattern at Vestum AB (WESC:SS). Vestum is a Swedish investment company that is focused on the construction and infrastructure sectors. Its aim is to grow continuously through the acquisition of well-managed and profitable companies and work together with ambitious entrepreneurs and company management teams in order to develop the businesses and drive profitable growth. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 603 million.
Vestum AB: Insider Buying
Our insider transaction data shows that between 15 June and 6 July, three insiders at Vestum purchased stock. Those who bought shares were:
● CEO & Founder Conny Ryk
● Chairman Per Ahlgren
● Board member Anders Rosenqvist
Combined, the three insiders made 12 purchases, buying 401,668 shares. In total, they spent about SEK 17.6 million (approx USD $2.0 million) on Vestum stock.
Bullish Cluster Purchase
There are two things that stand out about this cluster buying pattern. The first is the amount of money spent on stock. The fact that the three insiders have spent over SEK 10 million on shares suggests that they are very confident in relation to the outlook for the company and the stock.
The second is that two of the three insiders – the CEO and the Chairman – are top-level insiders. These insiders are likely to have access to information on operating activities that others do not have.
It’s worth noting that both the CEO and the Chairman have investment backgrounds. Mr. Ryk has more than 10 years of experience in Nordic private equity and has participated in over 30 M&A transactions. Meanwhile, Mr. Ahlgren founded Mangold AB – an institutional brokerage firm.
Increased Growth Target
Vestum has been busy making acquisitions recently. In late-May, for example, the company announced that it had acquired four businesses in the construction industry. Combined, the four businesses had total turnover of around SEK 360 million and EBITA of SEK 58 million last year.
More recently, the company advised that it had established itself in the plumbing industry with the acquisition of F Forsmans VVS AB. Last year, Forsmans generated sales of SEK 39.2 million and EBITA of SEK 5.2 million.
As a result of its progress on the acquisition front, Vestum raised its growth targets in June. It now expects to add pro-forma sales of at least SEK 2 billion and pro-forma adjusted EBITA of at least SEK 200 million through acquisitions annually. The previous growth target was to acquire at least SEK 100 million in pro-forma adjusted EBITA. The company noted that it had negotiated more favorable acquisition credit terms with leading Nordic credit institutions.
In light of these developments, we see the insider buying here as a bullish indicator. It suggests that the insiders are confident about the future and that they expect the stock to rise from here.