A number of academic studies have found that the most profitable insider transactions occur in small-cap firms. This segment of the market tends to be less efficient. This means there’s more potential for large share price movements.
In this report, we are going to highlight some insider buying in a US small-cap stock, Atricure (ATRC:US). Atricure is a leading provider of innovative solutions for the treatment of Atrial Fibrillation (Afib) and related conditions. It is listed on the NASDAQ Global Market and currently has a market capitalization of $1.96 billion.
Atricure: insider buying
Form 4 filings show that on 17 November, Atricure’s Chairman Scott Drake purchased 12,350 shares at a price of $40.54 per share. This purchase – which cost the insider $500,669 – increased his holding from 28,686 to 41,036 shares.
This insider purchase is significant for a couple of reasons. Firstly, it is large, both in nominal and relative terms. It has increased the size of Drake’s holding by 43%.
Secondly, Drake doesn’t purchase stock very often. Our records show that his last purchase was back in March 2018, when he purchased 11,000 shares at a price of $17.64 per share. His purchase on 17 November – which was around 2.5 times the size of his 2018 purchase – suggests he is confident the stock is set to rise.
Atricure posted a solid set of third-quarter results on 5 November.
For the quarter, revenue was $54.8 million, down just 3.3% on the same period last year. Meanwhile, adjusted loss per share was $0.11, a big improvement on the adjusted loss per share of $0.33 in the third quarter of 2019. The group advised that it expects revenue for Q4 to increase to between $56 million and $60 million.
Looking ahead, the company expects to continue growing. “We are continuing to make significant progress on our strategic initiatives and are on the forefront of meaningfully expanding our addressable market opportunity,” said Michael Carrel, President and CEO of AtriCure.
In light of these results, and the confident tone from management, we see the purchase from the Chairman as a bullish signal.