Following insider buying at smaller companies can be a very profitable trading strategy. Smaller companies are less researched than larger companies, meaning that they offer greater potential for outperformance.
In this report, we are going to highlight some interesting insider buying at a small US-listed company, DMC Global Inc (BOOM:US). DMC Global is a diversified holding company that invests in disruptive businesses. Its objective is to sustain and grow the market share of its businesses through increased market penetration, development of new applications, and research and development of new and adjacent products that can be sold across its global network of sales and distribution facilities. The company is listed on the Nasdaq and currently has a market cap of $307.9 million.
Insider buying at DMC Global
Our data shows that on September 16, board member Robert Cohen purchased 10,000 shares at a price of $18.75 per share. This trade cost the insider $187,500 and increased his holding to 30,195 shares.
This trading activity is worth highlighting for a couple of reasons. Firstly, Mr. Cohen has considerable investment experience. Since 2005, he has been the managing partner of Joranel LLC, a private investment and consulting firm serving institutional clients. Before this, he served as President and CEO of Korea First Bank and CEO of Credit Lyonnais USA. Given his background, he is likely to have a good idea of DMC’s intrinsic value.
Secondly, this trade has increased the size of Mr. Cohen’s holding by approximately 50%. The fact that the insider has upped his stake by such a large percentage suggests that he is quite confident the stock is set to move higher. Our Insider Model views this as bullish.
Solid Q2 results
DMC Global recently posted a solid set of Q2 results that exceeded the company’s guidance.
For the period, sales amounted to $165.8 million, up 20% sequentially and up 153% versus Q2 2021. Meanwhile, operating income was $9.9 million, compared with an operating loss of $3.9 million in the first quarter, and operating income of $2.7 million in last year's second quarter. Gross margin improved to 31% from 27% in Q1 2022 and 26% in Q2 2021.
Looking ahead, management was confident about the future. “Our second quarter performance illustrates the growing strength of DMC and its family of innovative, differentiated businesses,” said Kevin Longe, President and CEO. “I am more encouraged than ever by DMC’s prospects for long-term, profitable growth and strong returns for our stakeholders,” he added.
In light of these solid results, and the confidence from management, we see the insider buying here as a bullish indicator.