Insider buying can offer clues in relation to a stock’s future direction. Insiders sell company stock for many reasons. But they only buy stock for one reason – they expect it to go up.
Here, we are going to highlight an interesting pattern of insider buying at B. Riley Financial Inc (RILY:US). Through its subsidiaries, B. Riley Financial provides financial solutions tailored to fit the capital raising and financial advisory needs of public and private companies and high net worth individuals. The company is listed on the NASDAQ Global Market and currently has a market capitalization of $667 million.
B. Riley Financial: insider buying
Insider transaction activity that has caught our attention here is a series of purchases from insiders between early August and early September.
Form 4 SEC filings show that over this period, Chairman and Co-Chief Executive Officer Bryant R. Riley purchased RILY stock four times. In total, the insider bought 62,800 shares, spending approximately $1.7 million on stock. Meanwhile, President Kenny Young purchased 1,000 shares, spending $27,280, and board member Randy Paulson bought 25,000 shares, spending $674,020.
Source: 2iQ Research
This insider transaction activity stands out to us for several reasons. Firstly, Bryant R. Riley is a top-tier insider. Riley has served as Chairman and Co-Chief Executive Officer of the company since June 2014 and July 2018 respectively, and as a director since August 2009. In addition, Riley also founded B. Riley & Co., LLC in 1997 and served as Chairman of the stock brokerage firm until its combination with FBR Capital Markets & Co., LLC in 2017. It’s likely that he has a very thorough understanding of both the business and the industry.
Secondly, these are large purchases. Combined, they represent the largest amount of insider buying at B. Riley Financial for several years. The fact that they have been made at higher prices is also worth noting.
B. Riley Financial issued good Q2 results on 30 July. For the quarter, revenue came in $266.5 million, up from $164.7 million for the same period in the prior year. Meanwhile, adjusted EBITDA increased to $148.3 million, up from $52.9 million in Q2 2019.
The company also increased its dividend from $0.25 per share to $0.30 per share and declared a one-time special dividend of 0.05 per share for the quarter. "Our second quarter results demonstrate our ability to successfully execute on our strategy in a challenging environment created by Covid-19," said Bryant R. Riley. “The ongoing impact of Covid-19 creates limited visibility, but also tremendous opportunities where we believe our diversified platform will continue to serve as a competitive advantage,” he added.
Looking at these results, we see the recent insider buying here as a bullish signal. The company has momentum right now, and insiders clearly believe the stock has the potential to climb higher.