A number of academic studies have found that the most profitable insider transactions occur in small-cap stocks. This segment of the market tends to be researched less than the large-cap space. This means there’s more potential for large share price movements.
In this report, we are going to highlight some insider buying at a Norwegian small-cap company, Kid ASA (KID:NO). Kid is a retailer that is focused on home furnishings. Operating in Norway, Sweden, Finland and Estonia, it offers a large variety of curtains, bed linens and other interior products. The company is listed on the OMX Nordic Exchange Stockholm and currently has a market capitalization of NOK 3.7 billion.
Kid ASA: Insider Buying
Our records show that on 17 February, Kid’s CEO Anders Fjeld purchased 10,000 shares at a price of NOK 90.17 per share. This transaction cost the insider NOK 901,700 (approx $106,000).
Then, on 18 February, shareholder Solveig Gjelsten purchased 25,000 shares at a price of NOK 91.05 per share. Gjelsten is the wife of Bjorn Rune Gjelsten who founded Kid ASA and is still the company’s largest shareholder and primary insider. This transaction cost the insider NOK 2.3 million (approx $267,000).
This insider activity is worth highlighting for a couple of reasons. Firstly, these are top-level insiders that have bought stock. Both Fjeld and Gjelsten are likely to have a good understanding of the company’s recent performance and future prospects.
Secondly, Fjeld has an impressive track record when it comes to timing his purchases well. After he purchased KID stock in May last year, for example, it rose 55% in the next six months. Overall, he has a high 2iQ Trading IQ of 111.
Kid posted a solid set of Q4 results recently.
For the quarter, group revenues increased by 6.6% with like-for-like growth of 7.4%. While growth in its textile chain Hemtex was impacted in December by Swedish governmental Covid-19 related restrictions, the Kid Interior segment experienced a steady increase in revenue throughout the quarter. Online revenues increased by 59.2% and 46.4% in Kid Interior and Hemtex respectively.
As a result of this performance, the company proposed an ordinary dividend payment of NOK 3.40 per share along with an additional NOK 1.00 per share, payable 9 June 2021.
“We have turned the page, leaving 2020 behind and are looking forward to the new year – with full steam ahead. We see a lot of exciting opportunities and look forward to presenting new and extended product collections which we are confident will add further growth and profitability, and at the same time taking pride in inspiring our customers and contributing to making life more positive and joyful!” commented Anders Fjeld.
In light of these results, and the confident tone from management, we see the insider buying here as a bullish signal.