One of the most bullish insider transaction patterns is ‘cluster buying.’ This is where three or more insiders at the same organization have purchased company stock within a short period of time.

In this report, we are going to highlight a cluster buying pattern at Software AG (SOW:GR). Software AG is a German software developer and provider of technology platforms for businesses. Specializing in digital transformation solutions, the group works with businesses across a range of industries, including banking, energy, retail, and transportation. It is listed on Deutsche Börse’s Xetra and currently has a market capitalization of approximately €1.40 billion.

Insider Buying at Software AG

2iQ data shows that between February 9 and February 10, five insiders at Software AG purchased company stock at prices of between €19.41 and €21.56 per share. Those who bought shares were:

CEO and Chairman Sanjay Brahmawar (4,800 shares)
CFO Daniela Bunger (2,600 shares)
COO Benno Quade (2,600 shares)
Chief Product Officer Stefan Sigg (4,500 shares)
Chief Revenue Officer Joshua Husk (4,640 shares)

Combined, the insiders invested just under €400,000 in company stock.

Top-level Insiders

What stands out here is that those who have picked up shares are all top-level, ‘C-suite’ insiders. Top-level insiders tend to be better predictors of future stock performance than insiders lower down the corporate hierarchy.

Additionally, the insiders have invested a considerable amount of money in company stock. This buying activity represents the largest amount of insider buying at Software AG within a quarter for several years.

Share Price Fall

Software AG shares recently took a hit after the group posted its Q4/FY2022 results.

While the company had a strong end to the year and achieved its 2022 guidance, investors didn’t like the fact that operating profit margin guidance for 2023 was cut to 16-18%, down from previous guidance of 25-30%.

On the back of the reduction to operating profit margin guidance, analysts at UBS reduced their EPS forecasts for 2023 and 2024 by 10% and 14% respectively. They also downgraded the stock from ‘buy’ to ‘neutral’.

The recent insider buying here suggests that those within the company remain confident in the growth story and that they expect the stock to bounce back.

We see the cluster buying pattern as a bullish signal.

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