Thomas Aaron, a director at Cincinnati Financial (CINF), recently bought 2,500 shares of the company. The buy increased his stake by 115 percent, and the price paid came in just under $200,000.
This follow on two insider buys in early November from another director. Directors have been accumulating shares throughout the year, even as one C-suite executive made a large sale of shares. Over the past few years, insider buys have outnumbered sales. Overall, insiders own 6.8 percent of shares.
A property and casualty insurance company with a long operating history, shares of the company are still down 23 percent over the past year. While insurance companies in general have been weak, Cincinnati Financial has seen earnings grow 95 percent year over year and revenue increase of 31 percent.
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Action to take: With a relatively unleveraged balance sheet and 3 percent dividend, investors may like shares up to $80.
For traders, the insider nibbling near these prices suggest that shares will continue trending higher. The March 2021 $75 calls are about $3.50 in-the-money. With a price around $7.60, traders are betting on a gradual move higher in the next few months.
As long as shares continue their gradual uptrend, the option should move higher by mid-to-high double-digit levels. Insurance companies tend to be slow to rise and quick to fall, but with shares trending higher now, a call option trade still makes sense.