One of the most bullish insider transaction patterns is ‘cluster buying.’ This is where three or more insiders at the same organization are buying stock simultaneously.
In this report, we are going to highlight a cluster buying pattern at Tesco PLC (TSCO:LN). Tesco is a grocery retailer that has operations in the UK, Europe, and the Republic of Ireland. It is the largest supermarket in the UK, with a market share of around 27%. It is listed on the London Stock Exchange and currently has a market cap of £14.9bn.
Insider buying at Tesco
Our data shows that between October 5 and October 7, four insiders at Tesco bought stock. Those who purchased shares were:
- CEO Ken Murphy (24,352 shares @ 204p per share)
- CFO Imran Nawaz (24,352 shares @ 204p per share)
- Chairman John Allan (45,000 shares @ 209p per share)
- Board member Byron Elmer Grote (10,000 ADR shares @ 607p per share)
Combined, the three insiders invested £253,743 in stock.
What stands out here is that three top-level insiders have purchased stock. These insiders are likely to have superior knowledge of the company and its prospects.
Additionally, all three have substantial retail experience. Mr. Murphy, for example, worked for Walgreens Boots Alliance Inc. for over 20 years in a number of senior management roles prior to joining Tesco in October 2020. Mr. Nawaz, meanwhile, served in senior roles at Mondelēz International and Kraft Foods.
Large dividend increase
Tesco’s share price has experienced a significant decline in recent months. Back in mid-August, the stock was trading near 275p. Today, however, it’s near 200p.
At current levels, there appears to be some value on offer. At present, analysts expect the company to generate earnings per share of 20.8p for the year ending February 26, 2023. That puts the stock on a P/E ratio of less than 10 right now.
It’s worth noting that in Tesco's recent H1 results, posted on October 5, the company raised its interim dividend by 20.3% to 3.85p per share, despite the fact that higher costs weighed on profits. This suggests that management is confident about the future. For the full year, analysts expect Tesco to pay out 10.6p per share in dividends, which equates to a yield of around 5.3% at the current share price.
The company also said that it plans to buy back £300 million worth of its shares over the coming months. This should support earnings per share.
In light of the dividend increase here, and the stock’s low valuation, we see the insider buying as a bullish indicator.