Research shows that following insider buying in small-cap stocks tends to be a more profitable strategy than following insider buying in larger stocks. Smaller companies are less researched than larger companies, meaning that they offer greater potential for ‘surprises’ that can lead to outperformance.
In this report, we are going to highlight some interesting insider buying at a small US-listed company, Orion Engineered Carbons (OEC:US). Orion Engineered Carbons is a manufacturer of speciality carbon blacks for coatings, printing, inks, batteries, plastics, and numerous high-performance applications. It is listed on the New York Stock Exchange and currently has a market cap of $1.04 billion.
Insider buying at Orion Engineered Carbons
Our insider transaction data shows that on August 22, CEO Corning Painter purchased 30,000 OEC shares at a price of $16.77 per share. This trade cost the insider approximately $503,000 and increased his holding to 610,265 shares.
Building up his position
This is not the first time that Mr. Painter – who was appointed CEO in September 2018 – has made a large purchase here. Looking at our data, we can see that he has invested more than $500,000 in company stock on five occasions over the last two years. In total, he has picked up 180,000 shares (at prices of between $12.70 and $17.39 per share) over this period. This buying pattern suggests that he is optimistic about the future and that he sees considerable value in the stock at current levels.
Orion Engineered Carbons recently posted a solid set of Q2 results.
For the period, net sales amounted to $541.2 million, up 35% year on year. Meanwhile, adjusted EBITDA came in at a record $83.4 million versus $78.8 million a year earlier.
Looking ahead, management was very optimistic in relation to the company’s outlook.
“Orion’s record second quarter and first half results reflect a step-up in our earnings capacity with more to come,” said Mr. Painter. “With our capital expenditures transitioning away from U.S. air emissions compliance to high return projects in the next 12 months, we are well positioned to continue to grow our EBITDA and, starting in 2023, to generate strong discretionary cash flows further driving profitability, sustainability and returns to shareholders,” he added.
In light of this upbeat outlook statement, and the fact that the stock has a low valuation right now, we see the insider buying here as a bullish indicator.