2 Tech Small Caps With Recent Intensive Insider Buying

|
 |  Includes: ALSWF, GOGO
by: Markus Aarnio

The Technology Select Sector SPDR ETF (NYSEARCA:XLK) was trading as low as $13.08 in March 2009. The index is currently trading at $31.18, or 138.4% above its March 2009 lows.

Click to enlarge

In this article, I will feature two tech stocks that have seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.

  2. The stock is sold by no insiders in the month of intensive purchasing.

  3. At least two purchasers increase their holdings by more than 10%.

1. Gogo (NASDAQ:GOGO) provides in-flight Internet connectivity and wireless in-cabin digital entertainment solutions in the United States and internationally.

Click to enlarge

Insider buying by insider (last 30 days)

  • Jonathan Cobin purchased 1,000 shares on June 26 pursuant to the initial public offering. Jonathan Cobin currently holds 3,716 shares or less than 0.1% of the company. Jonathan Cobin joined Gogo on April 12, 2010 as senior vice President of project and operations management.
  • Michael Small purchased 20,000 shares on June 26 pursuant to the initial public offering. Michael Small currently holds 87,919 shares or 0.1% of the company. Michael Small was named president and CEO of Gogo on February 16, 2010.
  • Thomas McShane purchased 200 shares on June 26 pursuant to the initial public offering. Thomas McShane currently holds 200 shares or less than 0.1% of the company. Thomas McShane is VP, Controller and CAO of the company.
  • Ash Eldifrawi purchased 500 shares on June 26 pursuant to the initial public offering. Ash Eldifrawi currently holds 500 shares or less than 0.1% of the company. Ash Eldifrawi joined Gogo on October 25, 2010 as executive vice president and chief marketing officer and today services as Gogo's Chief Commercial Officer.

Insider buying by calendar month

Here is a table of Gogo's insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
June 2013 21,700 0
May 2013 0 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
Click to enlarge

The company had its IPO in June.

Financials

The company reported the pro forma first-quarter financial results with the following highlights:

Revenue $70.8 million
Net loss $32.5 million
Cash $250.0 million
Debt $134.7 million
Tangible book value $3.19 per share
Click to enlarge

Competition

Commercial Aviation:

  • Gogo-equipped planes represented approximately 81% of internet-enabled North American commercial aircraft as of April 30, 2013. Gogo's key competitors include Panasonic Avionics, Row 44, OnAir, LiveTV and Thales, all of which provide different technologies and strategies to provide in-flight connectivity or entertainment.

Business Aviation:

  • Gogo had 4,392 aircraft operating in North America with systems sold as of March 31, 2013, which represented approximately 29% of the North American business aircraft industry. Gogo competes against both equipment and telecommunications service providers to the business aviation market, including International Communications Group and True North Avionics for Iridium hardware business, Rockwell Collins (NYSE:COL) and Honeywell (NYSE:HON) for Inmarsat Swiftbroadband hardware business, and Satcom Direct for both Iridium and Inmarsat SwiftBroadband service.

My analysis

The stock started trading on June 21 after the initial public offering. There have been four different insiders buying the shares and there have not been any insiders selling the shares since the IPO. All directors and executive officers as a group own 65.7% of the company. For the three month period ended March 31, 2013 as compared with the three month period ended March 31, 2012, Gogo's consolidated revenue increased 30.4% from $54.3 million to $70.8 million. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

2. Absolute Software Corporation (OTCPK:ALSWF) develops, markets, and supports computer security and endpoint management services and products worldwide.

Click to enlarge

Insider buying by insider (last 30 days)

  • Martin Bestmann purchased 1,261 shares on July 2 pursuant to a purchase/ownership plan. Martin Bestmann currently holds 256,754 shares or 0.6% of the company. Martin Bestmann is a senior officer of the company.
  • Errol Olsen purchased 1,209 shares on July 2 pursuant to a purchase/ownership plan. Errol Olsen currently holds 5,095 shares or less than 0.1% of the company. Errol Olsen is Chief Financial Officer of the company.
  • Evan Sarantakes purchased 1,273 shares on July 2 pursuant to a purchase/ownership plan. Evan Sarantakes is Senior Vice President, General Manager - Europe, Middle East and Africa [EMEA] Sales.

Insider buying by calendar month

Here is a table of Absolute Software's insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
July 2013 3,743 0
June 2013 0 0
May 2013 0 0
April 2013 0 0
March 2013 0 81,500
February 2013 0 23,273
January 2013 0 0
Click to enlarge

The month of July has seen all of the insider buying this year.

Financials

The company reported the fiscal 2013 third-quarter, which ended March 31, financial results on May 8 with the following highlights:

Revenue $20.9 million
Net loss $0.5 million
Cash and investments $61.3 million
Click to enlarge

Outlook

The management believes that the company will continue to face improving, yet still challenging market conditions through the remainder of fiscal 2013. While the management expects the company to return to growth in fiscal 2014, the management continues to expect sales contracts for fiscal 2013 to be slightly below fiscal 2012 levels. The management remains committed to taking a balanced approach to operational investments, but also expects cash generated from operating activities to decline modestly compared to fiscal 2012.

Competition

Absolute Software has historically had few direct competitors in its services for computer data protection and theft management services. Most competitors have been small operators with limited resources to widely commercialize their offerings. However, concurrent with the increased proliferation and adoption of mobile devices over recent years, Absolute Software has seen increased competition, primarily in the consumer market for laptop computer tracking. Based on its proprietary technology, technology persistence, patent protection, managed theft recovery approach and PC OEM relationships, Absolute Software believes that its products maintain a competitive advantage in the marketplace.

In the data and device security market, Absolute Software also competes indirectly with data security companies that offer encryption solutions such as Safeboot from McAfee, Utimaco from Sophos, Checkpoint (NYSE:CKP) and Symantec (NASDAQ:SYMC), among others. Absolute Software's Computrace solutions are generally purchased as a complement to these solutions.

Absolute Software's endpoint lifecycle management solution, Absolute Manage, competes in a market where there is a greater level of established competition. In this market, Absolute Software competes with products such as Altiris from Symantec, LANDesk, Kace from Dell Inc. (NASDAQ:DELL) and BigFix from International Business Machines (NYSE:IBM), among others. The primary advantages of Absolute Software's solution include its firmware persistent technology, crossplatform capability (PC, Mac, Apple iOS, Android, and Windows Phone 7 support) and lower deployment and ongoing administrative and infrastructure costs as compared to solutions offered by Absolute Software's primary competitors.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. There are five analyst buy ratings, three neutral ratings and zero sell ratings with an average target price of $7.97. The stock is trading at a forward P/E ratio of 52.23 and the stock has a dividend yield of 2.95%. The 200-day moving average is currently at $5.52, which could be a good entry point for the stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.