Trades placed by corporate insiders happen on a regular basis. But when multiple buy orders take place in a short period of time, it can be a potent sign that those in the know, well, know the company's future is bright. An outsized buy order placed by an executive or director can have a similar effect.
Here we look at a few U.S. small-cap stocks that have seen some unusually large purchases by insiders. While there's certainly no guarantee that such stocks go up, when combined with fundamental or technical analysis, bullish insider activity can lend valuable support to an investment thesis.
What Does Alphatec Holdings Do?
On March 1st, Alphatec Holdings (NASDAQ:ATEC) director David Pelizzon purchased just shy of $90 million worth of the company's stock on behalf of investment group Squadron Capital where he is the President. To say the least, this was a big deal for a company that had just crossed into $1 billion market cap territory.
The 8 million-plus share acquisition was executed at a share price of $11.11. A couple months prior, Mr. Pellizon bought $15 million worth of Alphatec stock, so the more recent purchase bumped his indirect interest to nearly 11.4 million shares, or 14.5% of the shares outstanding.
Alphatec Holdings is a California-based medical technology company focused exclusively on spine surgery. This narrow focus doesn't equate to a small market though, as the U.S. spine market is estimated to be an $8 billion opportunity. Alphatec's technology platforms help spine surgeons worldwide have better clinical outcomes.
Despite controlling only 1% share of the spine market, Alphatec is growing fast. On average, quarterly revenue has grown 33% over the last 2 years. And based on Mr. Pelizzon's recent purchases, there is a least one high conviction insider providing the now $16-plus stock a lot of backbone.
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Are Insiders Buying Ironwood Pharmaceuticals Stock?
From surgery to drugs, Ironwood Pharmaceuticals (NASDAQ:IRWD) stock is also seeing some very bullish insider activity. Since March 8th, it has been nothing but insider buying in the Massachusetts-based developer of treatments for gastrointestinal (GI) disease.
This is when board member Alexander Denner began buying an additional 225,000 Ironwood shares over a three-day period with the stock trading just above $10. The purchases were made for Sarissa Capital Management, a hedge fund run by Mr. Denner which now owns nearly 16.4 million shares. Mr. Denner himself has a direct ownership in an additional 39,079 shares.
With Ironwood Pharmaceutical stock now trading above $11, it's easy to see why Sarissa Capital thinks it can go much higher. The company is best known for its blockbuster drug Linzess which it launched almost a decade ago in collaboration with AbbVie subsidiary Allergan. Linzess has been widely adopted by physicians in the U.S., Japan, China, and other parts of Asia as a treatment for patients with irritable bowel syndrome with constipation (IBS-C). I t is currently Ironwood's only commercialized product.
After two of the candidates in its drug pipeline were discontinued last year, Ironwood is re-focusing its attention on maximizing the potential of Linzess by expanding into new geographies and exploring additional label expansions. Ironwood is known to have strong partnerships with some of the world's top pharmaceutical companies that will continue to help it advance the use of Linzess and progress its pipeline ambitions.
Will Mack-Cali Shares Recover?
Mack-Cali Realty (NYSE:CLI) director Avika Katz has certainly been busy accumulating a position in the New Jersey-based real estate investment trust (REIT). From March 4th to April 19th, Mr. Katz completed six different buy transactions for private investment firm Bow Street where he is a managing partner.
In that span, more than 1 million Mack-Cali shares were scooped up by the board member putting a bow on Bow Street's more than 3.5 million shareholding. The buys were executed at prices ranging from $14.50 to $16.10, with the end of the range being roughly where Mack-Cali is trading now.
The $1.5 billion market cap REIT has had its valuation decimated by more than two-thirds since early 2007 when it was a $50-plus stock. As an office and multifamily property specialist, Mack-Cali was most recently impacted by the COVID-19 outbreak which took a heavy toll on the office REIT industry. The company owns several high-end waterfront properties along the Hudson River which have faced soft demand for office space in the pandemic economy.
With Mack-Cali suspending its dividend and trying to dig itself out of debt, the REIT may have nowhere to go but up from here. Last month, it sold its Metropark assets in two New Jersey towns for $254 million as part of a plan to pay down debt and focus on its core properties. Shareholders including insiders like Mr. Katz are hoping an improving real estate backdrop can lead to increased lease activity and better financial performances for Mack-Cali.
Interestingly, the insider buys occurred around the same time a couple of technical analysis patterns appeared on Mack-Cali's daily chart. Back on February 11th, a bottom triangle pattern formed suggesting a possible run to the $17.90 to $18.80 range. A couple of weeks later, an upside breakout occurred pointing to a similar uptrend as high as $19. Mack-Cali shares have since trended higher much to the chagrin of corporate insiders.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Mack-Cali Realty (CLI) | $0.00 | -100.0% | N/A | -44.76 | | N/A |
| Alphatec (ATEC) | $12.60 | +2.1% | N/A | -8.13 | Buy | $23.63 |
| Ironwood Pharmaceuticals (IRWD) | $7.73 | +1.7% | N/A | -1.19 | Buy | $19.80 |
