One of the most bullish signals in insider transaction analysis is what’s known as ‘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 cluster buying at Volvo AB (VOLVB:SS). Volvo AB is the parent company of the Volvo Group – a leading manufacturer of trucks, buses, construction equipment, diesel engines, and industrial engines that operates in nearly 200 markets worldwide. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of SEK 428 billion.
Volvo AB: Insider Buying
Between 20 July and 21 July, four members of Volvo’s Executive Board as well as Volvo’s main shareholder, Industrivarden, purchased VOLVB stock.
The largest purchase was from Industrivarden, which bought 3 million shares at a price of SEK 204.55 per share, spending SEK 614 million (approx. $71 million) on stock.
The members of the Executive Board who purchased stock were:
- Jan Ytterberg, Executive Vice President Volvo Group and CFO (2,750 shares @ SEK 194.02 per share)
- Joachim Rosenberg, Executive Vice President Volvo Group and President Volvo Energy (11,500 shares @ SEK 195.87 per share)
- Melker Jernberg, Executive Vice President Volvo Group and President Volvo Construction Equipment (5,000 shares @ SEK 193.61 per share)
- Roger Alm, Executive Vice President Volvo Group and President Volvo Trucks (5,200 shares @ SEK 193.91 per share)
Bullish Cluster Buy
This cluster purchase is very bullish, in our view. For a start, it involves multiple top-level insiders as well as the company’s main shareholder. All of these insiders are likely to have a superior level of information in relation to the company’s recent performance and prospects.
Secondly, all of the insiders in the cluster have made substantial purchases. This suggests that they are confident that the stock is undervalued at present.
Solid Q2 Results
Volvo recently posted a solid set of second-quarter results. For the quarter, net sales were up 24% year on year to SEK 90.6 billion. Adjusted for currency movements and the divestment of UD trucks, net sales increased by 43%. Meanwhile, reported operating income amounted to SEK 11,384 million, versus SEK 388 million in the same period last year. Earnings per share came in at SEK 4.38 versus SEK -0.14 in Q2 2020.
“During Q2 2020, demand for the Volvo Group’s products and services continued to be good,” commented President and CEO Martin Lundstedt.
Looking ahead, Volvo said that it will continue to be impacted by the global semiconductor shortage. In the second half of 2021, it expects disruption in truck production and other areas of the group. However, it added that it is maneuvering from a position of strength and will continue to seize growth opportunities by accelerating its efforts in sustainable transport and infrastructure.
In light of these results, we see the cluster buying here as a bullish indicator.