A number of studies have found that the most profitable insider transactions occur in small-cap firms. In this segment of the market, stocks are less researched meaning there’s potential for larger share price movements.
In this report, we are going to highlight some interesting insider buying in a US small-cap stock, Ayr Strategies Inc (AYRWF:US). AYR is a fast-growing, vertically-integrated US cannabis operator that cultivates and manufactures branded cannabis products for distribution through its network of retail outlets and through third-party stores. It is listed on the OTC Markets and currently has a market capitalization of $885 million.
Ayr Strategies Inc: insider buying
Our records show that in late December, both Chief Commercial Officer Chris Burggraeve and board member Glenn Isaacson purchased Ayr shares. Combined, these two insiders spent just under $500,000 on shares. Meanwhile, in November, board member Charles Miles spent over $100,000 on stock.
Multiple insiders have bought stock
We see this buying activity as a positive development for two reasons. Firstly, multiple insiders have purchased stock within a short space of time. This buying pattern, which is known as ‘cluster buying’ is one of the most powerful signals in insider transaction analysis.
Secondly, these purchases represent the largest amount of insider buying at Ayr within a quarter for several years. Our Insider Model views this buying activity as very bullish.
Strong momentumAyr’s third-quarter results showed that the company has significant momentum at the moment. For the quarter, revenue was up 61% on the previous quarter to $45.5 million while adjusted EBITDA more than doubled to $19.3 million. Additionally, throughout the quarter, the company announced planned expansions into Pennsylvania, Ohio and Arizona – more than tripling its addressable market to over 40 million people across five states.
“These past several months have been a transformative period for our business,” said Ayr CEO Jonathan Sandelman. “We had a record quarter with revenues up 42% year-over-year and 61% sequentially and Adjusted EBITDA more than doubled. And our strong annual run-rate through Q3 does not include our new dispensary in Las Vegas set to open in a few weeks, our transition to adult-use retail sales in Massachusetts, nor our recently announced acquisitions in Arizona, Pennsylvania and Ohio, all of which when completed point to an even more robust 2021,” he added.
In light of the company’s recent strong performance, and its planned expansion, we see the insider buying here as bullish.