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Live Oak Bancshares: Insiders Signal That Something Is Cooking

|About: Century Bancorp, Inc. (CNBKA), LOB
Summary

Originally posted on 1 February 2019 at www.theinsiderjob.com.

In my latest post from January 15th, I proposed to purchase Landec Corp (LNDC) based on insiders’ purchasing behavior. At the time of advertising the post, the stock was trading at $11.77. Today, two weeks later, LNDC is opened at 12.78 – that’s 8.58% in two weeks, and I’m still holding.

Strong signal – Live Oak Bancshares

Live Oak Bancshares (LOB), from Wilmington, NC, is a small national savings & loans bank (market cap of under $1M). The stock started trading in mid-2015 and traded well until starting to lose ground in mid-2018, despite revenue and income -from $33/share the stock dropped to ~$14.

Two analysts cover the stock, and both of them are less than excited with a $15 price target (similar to the current price). Two bloggers cover it as well and demonstrate similar indifference being natural about the stock. However, when the market doesn’t identify an opportunity, insider trading can be a beaming single.

As the stock price been parachuting from heights of $33, insiders have been amassing stocks. No less than 16 insider transactions took place since November 2018, involving 11 (!!!) insiders. The amounts are relatively humble too, clearly indicating that insiders are putting their own private savings into the company stock. In addition, during that period there hasn’t been a single insider sell. The insider alert is on, and I purchased the stock on for $14.48.

Potential signal – Century Bancorp

Century Bancorp (CNBKA), is a regional bank that was started in 1969 and has grown to become New England’s largest family-run bank. The bank has a good run since the financial crisis of 2008, and even double in value in last two years. Currently, the stock is hovering around all-time highs, and this is why I’m hesitant about it despite insider signals. In addition, the insider purchasing pattern is a bit off in terms of pace and amounts, so even though there are no insider sales at all, I am going to just keep it on my radar and not take action.

Summary

When purchasing a stock based on insider activity I normally hold it for up to 6 months or 30% increase, whichever comes first. During that time the potential should unfold, and if not, it probably wouldn’t, at least in this round (unless there is additional significant insider activity). I’m purchasing LOB at $14.48 and hope to see a nice return in the coming months. I’ll be back next week to highlight opportunities, revisit previous recommendations, and share more details on my analysis methodology.