Research shows that following insider buying at smaller companies tends to be a more profitable strategy than following insider buying at larger firms. Smaller companies are less researched than larger businesses, meaning that they offer greater potential for outperformance.
In this report, we are going to highlight some interesting insider buying at a small British company, Induction Healthcare Group PLC (INHC:LN). Induction Healthcare is a technology company that specializes in healthcare system solutions. Its key product, Induction Switch, allows hospital staff to share phone numbers and bleeps, bookmarks, documents, and messages securely, and is used by the UK’s National Health Service (NHS). The company is listed on the London Stock Exchange’s Alternative Investment Market (AIM) and currently has a market capitalization of £52.01 million.
Induction Healthcare Group: Insider Buying
Our insider transaction data shows that between April 11 and April 12, five insiders at Induction Healthcare made substantial purchases. Those who bought stock were:
- Board member Andy Williams (370,473 shares @ an average price of 53p per share)
- Board member Hugo Stephenson (100,000 shares @ 54p per share)
- Board member Leslie-Ann Reed (57,100 shares @ 53p per share)
- CEO James Balmain ( 7,300 shares @ 54p per share)
- CFO Guy Mitchell (9,200 shares @ 54p per share)
Combined, the three insiders spent around £285,000 on company stock.
Bullish Buying Pattern
There are a couple of things that stand out about this buying pattern. Firstly, multiple insiders are buying simultaneously. Generally speaking, this is quite bullish as it indicates that there’s a consensus of opinion within the company that the share price is set to move higher.
Secondly, Mr. Williams has increased the size of his position by 71%. This is significant as the board member was previously the CEO of NHS Digital, the government body responsible for technology and data for the NHS. This means that he is likely to have an excellent understanding of the company’s prospects.
In December, Induction Healthcare posted a strong set of half-year results for the six months to 30 September 2021.
For the period, revenue amounted to £4.6 million, up from £582,000 a year earlier. Meanwhile, adjusted loss before highlighted items (LBITDA) came in at £0.7 million versus £2.4 million in H1 2021. Annual recurring revenue (ARR) rose 929% to £14.4 million.
Since then, the company has announced some major contract wins. On April 4, it announced that four London NHS Trusts had signed up for its Induction Zesty product. This will result in total revenue of around £3.6 million in the years ahead. And then on April 11, it announced that it had renewed a £6.6 million ARR deal with NHS England.
In light of these developments, we see the insider buying here as a bullish indicator. The company has momentum right now and insiders clearly expect the share price to go higher.