Insider buying can provide clues about a stock’s future direction. Insiders only buy company stock for one reason – they expect it to go up.
In this report, we are going to highlight a large insider purchase at Dollar Tree Inc (DLTR:US). Dollar Tree is an American retailer that operates discount variety stores. Operating more than 15,000 stores across the US and Canada, it is the largest single-price-point retailer in North America. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $22.7 billion.
Dollar Tree Inc: Insider Buying
Our insider transaction data shows that on 1 June, Lead Independent Director Gregory Bridgeford bought 5,100 DLTR shares at a price of $99.02 per share. This purchase cost the insider just over $500,000.
This trade is worth highlighting for a couple of reasons. Firstly, it is substantial both in nominal and relative terms. Our data shows that it has increased the size of Mr. Bridgeford’s holding by around 640%. This suggests that the insider is very confident that DLTR stock is set to rise.
Secondly, Mr. Bridgeford has considerable experience in the retail sector. Previously, he spent 30 years at Lowe’s in a number of top roles including Chief Customer Officer and Executive Vice President of Strategy and Business Development. He is likely to have a good read on the industry and his company’s prospects.
Record Q1 Results
Dollar Tree recently posted record first-quarter earnings. For the quarter, consolidated net sales were up 3.0% year on year to $6.48 billion while operating income for the quarter was up 42.1% to $519.9 million. Net income increased 51.3% to $374.5 million while diluted earnings per share increased 53.8% to $1.60, compared to $1.04 in the prior year’s quarter. During the period, the company repurchased 2,150,572 shares for $250 million.
Despite these strong numbers, the stock fell around 8% after the earnings report on the back of concerns over transportation costs and wage-related pressures. Freight costs in the last three quarters of fiscal 2021 are projected to be $0.70 to $0.80 higher than the comparable period in fiscal 2020, in terms of the impact on diluted earnings per share. However, the company said that the disruption in shipping is not expected to be permanent.
The insider purchase from Mr. Bridgeford suggests that he expects the stock to bounce back. We see his trade as a bullish signal.