There are two main reasons why insiders would invest in their own companies. They believe the performance of the business is going to improve or they are of the opinion that the current share price undervalues their company. Whatever the reason for insider buying, outsiders only need to know one thing: insiders think that the company stock price will go up and this often provides investors with a valuable trading signal.
In this article we are going to flag multiple recent insider transactions at Cryolife Inc (CRY:US) by the CEO and members of his senior team. Cryolife is a biomedical company that manufactures, processes and distributes medical devices and cryogenically preserved human tissues to the healthcare sector worldwide. Cryolife is listed on the NYSE and currently has a market capitalization of $658 million.
Cryolife: insider buying
On August 16th, CEO James Mackin increased his holding by 7,500 shares to 264,274 shares, a monetary increase of $125,524. Senior Vice President John Davis increased his holding in Cryolife by 10,000 shares to 70,451 shares. Independent Director James Bullock also increased his holding by 10,000 shares and now owns 34,023 shares.
Source: 2iQ Research
This pattern of insider buying is significant for a number of reasons. Firstly, empirical data suggests that share purchases by the most senior insiders in a company provide the strongest positive signals in relation to future company performance. CEO James Mackin has a positive long-term buying IQ of 109 which suggests he times his share purchases well. Our insider model sees this buying activity as very bullish.
Secondly, this was the largest amount of insider buying within a quarter for a long period of time at Cryolife Inc with three insiders buying at once. This sends a strong signal to investors that insiders’ confidence in Cryolife’s future prospects is strong.
Transformational acquisition of Ascyrus Medical
Cryolife has a strong track record of making bolt-on acquisitions to drive growth. After a significant period of growth which saw the share price treble between 2016 and mid 2018, the share price has faltered as growth has slowed. Covid has meant that non-essential operations have been cancelled and this has had a significant impact on 2020 revenues. The Ascyrus Medical acquisition looks a good fit for Cryolife and it should ensure the company benefits from high single digit revenue growth starting in 2021. CEO Pat Mackin said the deal has the potential to expand the worldwide addressable market by approximately $540 million. In the long-term, non-essential operations will have to proceed which will see lost revenue return. The Ascyrus Medical deal looks like a well-timed purchase by Cryolife.
We see the recent insider buying at Cryolife as bullish. The purchases suggest that the CEO and members of his team are confident that growth will return and that they currently see the CRY stock as being undervalued by the market.