Smart Global Holdings Inc (SGH:US)
12-month performance: -18%
Insider activity: Bullish
Insider buying pattern: Purchase from CEO
Recent news: Good Q4 results
A number of academic studies have found that the most profitable insider transactions occur in small-cap firms. This is a segment of the market that is often less efficient. This means there’s more potential for large share price movements.
In this report, we are going to flag some interesting insider buying in a US small-cap stock, Smart Global Holdings Inc (SGH:US). Smart Global Holdings is a technology company that specializes in memory and storage solutions. It’s listed on the NASDAQ Global Select Market and currently has a market capitalization of $600 million.
Smart Global Holdings: insider buying
Form 4 filings show that on 23 October, SGH’s President and CEO Mark Adams added to his direct holding of 475,000 SGH shares by buying 9,820 shares for his family trust. The insider paid $25.99 per share for his shares. The total cost of the purchase was $255,269.
Source: 2iQ Research
One reason we see this insider buying as interesting is that Adams has a significant amount of experience in the memory/storage industry. Prior to joining Smart Global Holdings, he served as President of Micron Technology, Inc., a global leader of memory solutions. Prior to joining Micron, he served as Chief Operating Officer of Lexar Media, which specializes in flash memory products. Adams also currently serves on the boards of Seagate Technology PLC and Cadence Design Systems, Inc. Given Adams’ industry experience, we see this stock purchase as a positive development.
Good Q4 resultsSmart Global Holdings recently posted a good set of fourth-quarter results. For the quarter ended 28 August, net sales were $297 million, up 7% on the same period last year. Non-GAAP net income was $20.4 million or $0.82 per share, 72.2% and 65.2% higher than the year ago quarter, respectively.
“I am pleased to announce a strong conclusion to our fiscal 2020. Our fourth fiscal quarter results demonstrate the strength of our business during these challenging times, said Mr Adams.
“Given our strong balance sheet, we believe we are well-positioned to build on our growth and diversification strategy while leveraging our strong customer relationships, established global manufacturing and supply chain capabilities, and our track record of operational excellence,” he added.
In light of these solid results, we see the insider buying from the CEO as a bullish signal.