Following insider buying at smaller companies can be a very profitable trading strategy. Smaller companies are less researched than larger firms, meaning that they offer greater potential for outperformance.
In this report, we are going to highlight some interesting insider buying at a small US-listed company, F45 Training Holdings Inc (FXLV:US). F45 Training Holdings is a fitness franchisor that is focused on creating a global fitness training and lifestyle brand. The company, which has operations in the US, Europe, and Australia, went public in July 2021 via an IPO. It is listed on the New York Stock Exchange and currently has a market capitalization of $964 million.
F45 Training Holdings Inc: Insider Buying
Our insider transaction data shows that there have been several large insider buys at F45 recently.
Since November 29, Founder, Chairman, and CEO Adam Gilchrist has purchased stock on three occasions, buying a total of 170,500 shares. These purchases have cost the insider around $1.8 million.
Meanwhile, since November 29, investment management firm and 10% owner Kennedy Lewis has made two purchases, picking up 250,000 shares, and spending about $2.6 million on the stock.
Both Mr. Gilchrist and Kennedy Lewis Investment Management are likely to have deep insight into F45’s prospects as well as a good understanding of the stock’s potential.
Mr. Gilchrist – who co-founded the company – is a serial entrepreneur with 20 years’ experience in franchising, marketing, and product development. Previously, a Co-CEO of the company, he was appointed as sole CEO in 2019. Before starting F45, he launched an e-payment business in Australia which he sold to a public company.
Meanwhile, Kennedy Lewis’ Co-Portfolio Manager is Darren Richman, who joined F45’s board of directors in 2020. Mr. Richman was formerly a Senior Managing Director with Blackstone’s global credit business, GSO Capital Partners, where he focused on special situations and distressed investments and sat on the Investment Committee for many of Blackstone Credit’s special situation-oriented funds. Before this, he was a Vice President and Senior Special Situations Analyst at Goldman Sachs.
What stands out about the insider transaction activity here is that the purchases are substantial. This indicates that both Mr. Gilchrist and Mr. Richman are confident the stock is set to move higher.
F45’s recent Q3 results missed estimates.
For the period, revenue came in at $27.2 million, up 24% year on year, but below analysts’ forecast of $30.42 million. Meanwhile, loss per share was $1.52 compared to an expected loss of 5 cents per share. Adjusted EBITDA increased 37% to $10.1 million.
As a result of the miss on the top and bottom line, the FXLV share price fell significantly.
However, the outlook statement from management in the Q3 results was actually quite optimistic.
“We delivered another solid quarter with continued strength in New Franchise Sold and significant recovery in studio Visits, particularly in the United States – our most important growth market. With approximately 1,400 Total Franchises Sold but not yet open studios, we believe we are well positioned to achieve our ambitious unit growth targets,” said Mr. Gilchrist.
“We recently announced several exciting milestones that we believe will help accelerate our growth into the future, including the expansion of our partnership with the U.S. Military; our collaboration with OneSpaWorld, which brings the F45 experience to the high seas; and finally, the entry into a definitive agreement to acquire Vive Active, which will strengthen our business through the addition of a disruptive and innovative fitness brand to our portfolio,” he added.
In light of the confidence from management, we see the insider buying here as a bullish indicator. It suggests that insiders expect the stock to bounce back.