Research on legal insider trading shows that insiders at small firms tend to earn significantly greater profits from the purchases of company stock than insiders at large firms. Smaller companies are less researched than larger companies, meaning that they are often less efficiently priced.
In this report, we are going to highlight some interesting insider activity in a US small-cap stock, Emclaire Financial Corporation (EMCF:US). Emclaire Financial is the holding company of the Farmers National Bank of Emlenton, which has approximately 20 retail branch offices across Pennsylvania. The company is listed on the NASDAQ Capital Market and currently has a market capitalization of $76 million.
Emclaire Financial: Insider Buying
Our records show that this month, two insiders have purchased EMCF stock. On 4 May, Director Nick Varischetti purchased 21,751 shares at a price of $27.30 per share, spending $593,802 on the stock. The same day, Director Mark Freemer purchased 5,400 shares at a price of $27.30 per share, spending $147,420 on the stock. Combined, these insiders spent around $740,000 on Emclaire stock.
This insider activity stands out for two reasons. Firstly, both insiders have increased the size of their holdings significantly. Varischetti’s purchase, for example, has increased the size of his holding by 46%. Meanwhile, Freemer has increased the size of his holding by 26%. This suggests that these insiders are very confident that the stock is set to move higher.
Secondly, these purchases represent the largest amount of insider buying at Emclaire within a quarter for several years. Our Insider Model views this trading activity as bullish.
Record First-Quarter Earnings
In April, Emclaire Financial Corp posted record first-quarter earnings. For the quarter, the group reported consolidated net income available to common stockholders of $2.2 million, or $0.79 per diluted common share, an increase of $984,000, or 82.7%, from $1.2 million, or $0.44 per diluted common share, reported for the comparable period in 2020. Net interest income increased $962,000, or 14.4% year on year, to $7.7 million while the provision for loan losses decreased by $517,000, or 65.3% year on year, to $275,000.
“Now an entire year into the pandemic, the Bank has proven its strength and resiliency as demonstrated through sound earnings, continued strong credit quality, and tremendous balance sheet growth,” commented William C. Marsh, Chairman, President, and Chief Executive Officer. “We are cautiously optimistic that the burdens of the pandemic will ease in the year ahead,” he added.
In light of these results, we see the insider buying here as bullish.