A number of academic studies have found that the most profitable insider transactions tend to occur in small-cap stocks. In this area of the market, stocks have the potential to generate huge gains.
In this report, we are going to highlight some interesting insider buying in a UK small-cap stock, Learning Technologies Group (LTG:LN). Learning Technologies is a provider of digital learning and talent management solutions. Its goal is to help clients achieve measurable results and close the gap between current and future workforce capability. The company is listed on the Alternative Investment Market (AIM) of the London Stock Exchange and currently has a market capitalization of £1.1 billion.
Learning Technologies: Insider Buying
Our records show that on 29 March, Independent Director Leslie-Ann Reed bought 100,000 shares at a price of £1.54 per share. This purchase cost the insider £154,000.
A Bullish Director Deal
This purchase stands out because it is the first insider purchase at Learning Technologies since July 2019. Interestingly, the last purchase was also from Ms Reed. Our data shows that on 23 July 2019, she purchased 271,646 shares at a price of £1.14 per share. Since then, the stock has risen to £1.58, netting the insider a gain of about 39%. That’s an excellent return when you consider that the UK’s main stock market index, the FTSE 100, has declined by about 10% over that period.
It’s worth noting that Ms Reed – who has a background in both finance and technology – is currently the 16th largest shareholder at Learning Technologies with a holding of 4.9 million shares. This means she is likely to have a very good understanding of the company, and its future prospects.
Learning Technologies delivered a solid performance in 2020 given the challenging macroeconomic backdrop. For the year, revenue increased 2% to £132.3 million, while adjusted diluted EPS only fell 1% to 4.29p. Recurring revenue rose to 81%, up from 74% in 2019. Net cash at the end of 2020 was £70.2 million, up from £3.8 million at the end of 2019.
Looking ahead, the company said it expects a stronger performance in 2021. “LTG enters 2021 with organic growth momentum, supported by a more diversified business and enhanced capabilities to capture long-term structural growth opportunities,” said CEO Jonathan Satchell.
Learning Technologies also said that it’s on track to deliver against its strategic targets for the end of 2022 which include a goal of c.£230 million run-rate revenues.
In light of this outlook, we see the insider purchase here as bullish.