A number of studies have found that the most profitable insider transactions occur in small-cap firms. This segment of the market is often under-researched. This means there’s more potential for large, upward share price movements.
In this report, we are going to highlight an interesting pattern of insider buying at a small Italian company, Sanlorenzo SpA (SL:IM). Sanlorenzo specializes in the design, manufacturing, and distribution of custom-made yachts and superyachts. The company is listed on the Borsa Italiana and currently has a market capitalization of €862.50 million.
Sanlorenzo: Insider Buying
Our records show that in the second half of July, Sanlorenzo’s Chairman & CEO Massimo Perotti purchased company stock on 10 occasions. In total, the insider picked up 62,466 shares, spending around €1.5 million on stock.
Good Track Record
This insider trading activity is worth highlighting for a couple of reasons.
Firstly, Perotti has spent a considerable amount of money on stock. This suggests that the insider is confident the stock is set to rise. It’s worth noting that Perotti did make a large sale (1 million shares) in June. However, this sale was a placement designed to increase the company’s free float.
Secondly, Perotti has made well-timed purchases in the recent past. In January, we highlighted the fact that the insider had spent around €650,000 on stock in December 2020 when the share price was near €16. Since then, the share price has climbed to €25, generating a gain of more than 50% for the insider.
Sanlorenzo’s first-quarter results showed that the company is making a strong recovery after Covid-19. For the period, net revenues from the sale of new yachts came in at €118.0 million, up by 20.5% compared to the first quarter of 2020, driven by a further acceleration in APAC and the Americas. Meanwhile, group net profit amounted to €8.3 million, up by 39.9% compared to the €5.9 million figure posted in the first quarter of 2020. At the end of the quarter, the group had a net debt position of €25.9 million, a clear improvement over the figure of €60.7 million as of 31 March 2020.
Looking ahead, Sanlorenzo said that for 2021, it is targeting double-digit growth in all its main metrics. Currently, it expects to achieve 17% growth in revenue and 26% growth in net profit for the year. It added that its estimates are supported by a backlog of €632.1 million as of 30 April 2021 (compared to €408.8 million as of 31 December 2020), which covers about 85% of the expected revenues for the current financial year.
In light of this outlook, we see the insider buying here as a bullish indicator.