In his book One Up On Wall Street, legendary investor Peter Lynch pointed out that insiders may sell for various reasons, but they buy only when they are positive about their companies.
Insider purchase is a particularly useful piece of information for small-cap companies (market cap < $2 billion). When tracked timely, followed by more careful analysis, selectively picking the champions from a short list of insider-buying stocks can be quite profitable.
The reason is simple: small companies are relatively simple in business structure and insiders tend to know the details of their companies a lot better comparing to large caps.
Below is a list of notable insider purchases of small-cap stocks filed at the Securities and Exchange Commission today. Following Seeking Alpha's small-cap policy, all the stocks in the table are greater than $1 per share or $100 million market cap.
I have written a short analysis of each company's financial records. However, these are not buying and selling recommendations.
GP Strategies Corp. (GPX) is a education & training services company. It has a market cap of $323.10 million. According to today's SEC filing, GP Strategies has 2 insiders who purchased a total of 13,400 shares at the total value of $221,092. Multiple insider purchase occasions are usually a positive sign. Its price shows near term strength, close to 52-week high (only 5.32% lower). GP Strategies has an enterprise value / EBITDA ratio of 8.49. This is a reasonable valuation. Its has a decent operating margin of 8.18%. Its return on assets is 9.19%. Its return on equity is 14.11%. Both are reasonably good. The company had a net income of $19.65 million, EBITDA of $36.64, and gross profit of $56.63 million on a revenue of $362.48 million. Both its revenue and earnings grew in double digits over the latest quarter, by 45.60% and 69.30%, respectively.
Pulaski Financial Corporation (PULB) is a savings & loans company. It has a market cap of $76.90 million. The dividend is generous at 5.40%. According to today's SEC filing, Pulaski Financial has one insider who purchased a total of 3,000 shares at the total value of $20,970. It has a reasonable P/E ratio of 12.64. Its price/book ratio is 0.84. Its profit margin was 18.65% over the past year. I like Pulaski Financial's operating margin of 35.18%, a good sign for the company's financial health. Its revenue declined by 7.50%, but net income improved by 28.30% during the most recent quarter.
TCF Financial Corporation (TCB) is a money center bank. It has a market cap of $1.824 billion. The company pays a dividend of 1.70%. According to today's SEC filing, TCF Financial has 11 insiders who purchased a total of 309,400 shares at the total value of $7,735,000. Multiple insider, large amount purchase occasions are usually a positive sign. Its price/book ratio is 1.16. TCF Financial's operating margin is very healthy at 30.26%. This month, 11.59 million shares are being shorted. Comparing to 12.23 million shares shorted over the previous month, the shared short has decreased by 5%. The short ratio of TCF Financial is 5.30, accounting for 7.90% of floating shares.
First Financial Corp. (THFF) is a regional bank in Midwest. It has a market cap of $380.00 million. The company pays a dividend of 3.30%. According to today's SEC filing, First Financial has one insider who purchased a total of 3,616 shares at the total value of $100,958. It has a reasonable P/E ratio of 10.23. Its price/book ratio is 1.05. Its revenue grew by 5.80%, and its net income declined by 15.40% during the most recent quarter. This month, 0.33 million shares are being shorted. Comparing to 0.27 million shares shorted over the previous month, the shared short has increased by 22%. The short ratio of First Financial is 9.00, accounting for 3.20% of floating shares. The short ratio is high but the percentage of float is not up the point of alarming.
USA Technologies Inc. (USAT) is a business services company. It has a market cap of $44.90 million. According to today's SEC filing, USA Technologies has one insider who purchased a total of 10,000 shares at the total value of $13,200. The company is currently losing money operationally. Its business has to turnaround for the situation to become more positive. The company had a net loss of $5.03 million and EBITDA loss of $2.01 million on a revenue of $28.00 million. Thinning trading volume suggests that trading interest in the company is waning. I do not see enough evidence for establishing a position.
Vision-Sciences Inc. (VSCI) is a medical appliances & equipment company. It has a market cap of $64.90 million. According to today's SEC filing, Vision-Sciences has one insider who purchased a total of 10,000 shares at the total value of $15,089. The company had an EBITDA loss of $-9.28 million on a revenue of $16.69 million. It operating cash flow is -11.63 million, and its free cash flow is -7.37 million. Recently, the stock is not traded actively. There aren't enough positive factors to buy this company based on insider purchase alone.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.