Insiders at small companies tend to earn larger profits from their purchases of company stock than insiders at large firms. One reason for this is that small-cap stocks are often mis-priced by the market.
In this report, we are going to highlight some interesting insider buying at a small Swedish company, NOTE AB. NOTE is a manufacturing company that offers a platform for manufacturing electronics-based products that require a high level of technological competence. Its services include early-stage engineering services, batch production, and advanced aftermarket services. The company is listed on the Nasdaq Stockholm stock exchange and currently has a market capitalization of SEK 2.9 billion.
NOTE: Insider Buying
Our insider transaction data shows that in June, NOTE board member Johan Hagberg has purchased stock on four occasions. In total, the insider has purchased 18,205 shares, spending around SEK 1.9 million (approx. USD $225,000) on the stock.
This insider transaction activity is worth highlighting due to the fact that Mr. Hagberg – who joined the board in 2017 – is the largest shareholder in NOTE with a holding of 5.88 million shares. He is also a professional investor by occupation. He is likely to have an in-depth understanding of the company.
It’s worth noting that our data shows that Mr. Hadberg has a good track record when it comes to timing his purchases well. In 2018, the insider bought a large amount of NOTE stock when the share price was near SEK 20. Since then, it has risen above SEK 100. Our model gives the insider a long-term Trading IQ of 114 which is very impressive.
Strong Growth in Profits
NOTE’s first-quarter results, posted in April, were strong. For the period, sales were up 6% to a record SEK 502 million while operating profit was up 21% to SEK 40 million. Profit after tax increased by 37% to SEK 31 million, corresponding to earnings per share of SEK 1.08 per share versus SEK 0.80 in Q1 2020.
Looking ahead, management was confident in relation to the company’s growth prospects, stating that strong new sales and a strong recovery in demand are paving the way for an increased growth rate. It noted that the order backlog at the end of the quarter was up 30% year on year.
“Based on the current market situation and our strong order backlog, I consider the conditions as very good to achieve growth of 10%-20% for the full year and continue our positive profitability trend,“ said Johannes Lind-Widestam, CEO and President.
In light of these strong results, we see the insider buying here as bullish. It indicates that Mr. Hagberg expects the stock to continue rising.