CFO purchases can be very informative insider transactions. CFOs tend to have considerable insights into their firms’ financial health and some studies have found that these insiders earn larger profits following their purchases of company shares than CEOs.
In this report, we are going to highlight a large CFO purchase at CapStar Financial Holdings Inc (CSTR:US). CapStar Financial Holdings is the holding company of CapStar Bank – a Nashville-based bank that offers tailored financial solutions to businesses and consumers. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $440 million.
CapStar Financial Holdings: Insider Buying
Our records show that on 28 April, CapStar’s CFO Denis Duncan purchased 20,000 CSTR shares at a price of $18.98 per share. This purchase – which cost the insider $379,600 – increased the size of his holding by 81%.
This trade stands out for a couple of reasons. Firstly, it is substantial in size. The fact that Duncan has increased the size of his holding by 81% suggests that he is very confident CapStar’s share price is set to rise.
Secondly, our data shows that Duncan has made a number of very well-timed purchases recently. In early November, for example, the insider purchased 13,650 shares at a price of $10.65 per share. Then, in mid-December, he added another 11,150 shares at a price of $13.49 per share. Today, the share price is near $20 meaning Duncan has made excellent profits from these trades.
CapStar Financial recently posted an impressive set of Q1 results. For the quarter ended 31 March, the group reported net income of $11.0 million or $0.50 per diluted share compared to net income of $1.3 million or $0.07 per diluted share for the same period in 2020. Annualized return on average tangible equity for the period was 14.85% compared to 2.31% in Q1 2020 while annualized return on average assets for the period was 1.45% compared to 0.26% in Q1 2020.
As a result of this strong performance, CapStar announced a quarterly dividend of $0.06 per common share, an increase of 20% from $0.05 in the first quarter of 2020. The company advised that the dividend increase reflects the Board of Directors’ confidence in CapStar’s near-term and long-term strategy and further underscores its commitment to return value to shareholders.
“CapStar began 2021 with outstanding results,” commented Timothy Schools, President, and CEO. “If current trends continue, we are optimistic that 2021 can be an outstanding year for CapStar,” he added.
In light of the dividend increase and the confident tone from management, we see the purchase from the CFO here as a bullish signal.