Research shows that following insider buying in small-cap firms tends to be a more profitable strategy than following insider buying in larger firms. Smaller companies are less researched than larger companies, meaning that they offer greater potential for ‘surprises’ that can lead to outperformance.
Here, we are going to highlight insider buying at small-cap company Boxed Inc (BOXD:US). Boxed is a US based wholesale retailer that delivers in bulk via its app or through its website. The retailer has storage facilities in the states of New Jersey, Texas, and Nevada, which allows deliveries to be fulfilled within 48 hours. It’s listed on the New York Stock Exchange and currently has a market capitalization of $123.37 million.
Boxed Inc: Insider Buying
Our insider transaction data shows that between June 10 and June 16, three insiders at Boxed Inc purchased stock. Those who picked up shares were:
- Director Andrew Pearson (150,000 shares @ $1.82 per share)
- Chief Executive Officer Chieh Huang (10,000 shares @ $1.649 per share)
- Director David Liu (20,000 shares @ $1.664 per share)
Combined, the three insiders spent around $320,000 on stock.
Extensive Investment Experience
This insider buying interests us for a couple of reasons.
Firstly, Mr. Pearson has extensive investment experience and rose to become Global Head of Portfolio Management at General Atlantic during his 22-year career there. In 2019, he founded Soundview Advisors which acts as a consultant to leading private equity firms. This leads us to believe he is a very capable stock picker, and it is therefore very interesting that he is buying Boxed shares at current levels.
Secondly, the director has increased his holding in the company by a third and has spent close to $300,000 on stock. This would suggest that he is very confident that the company’s shares have been oversold and that they represent good value at the current levels.
Encouraging Q1 Results
Boxed saw many of its key metrics grow in Q1.
Net revenue for the quarter of $46.6 million was up 14.1% on Q1 2021 with revenue in the Software & Services segment rising 127.1% to $2.2 million. Retail Net Revenue per Active Customer figure for the quarter grew 32.4% to $276 versus the year prior.
While the company reported a higher EBITDA loss at $22.2 million this was expected and was due to increased advertised spend and investment in staff, professional services costs, and insurance costs. The gross profit figure of $6.1 million for Q1 2022 was 23.7% higher than the first three months of last year.
At the end of March 2022, the company had a cash balance of $72.7 million.
“We are reporting strong results to start 2022, with growth re-accelerating and a host of exciting developments underway across both our Retail and Software & Services segments. B2B demand continued to strengthen in the quarter as offices reopen across America,” said Chieh Huang, Co-Founder and Chief Executive Officer.
On the back of these positive results, we see the recent insider buying at Boxed as a bullish event. The share price has fallen significantly recently, and the director appears to have taken advantage of this. Given his experience in the financial sector it is notable that he has chosen to raise his stake by a sizable amount.