Following insider buying in small-cap stocks tends to be a more profitable strategy than following insider buying in large-cap stocks. That’s because smaller companies are less researched and can offer greater potential for outperformance.
In this report, we are going to highlight some interesting insider buying in a US small-cap stock, StoneX Group Inc (SNEX:US). StoneX is a diversified global brokerage and financial services firm that provides execution, risk management, advisory services, market intelligence, and clearing services across multiple asset classes and markets around the world. It serves more than 30,000 commercial, institutional and payments clients, and more than 295,000 active retail accounts across 140 countries. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $1.3 billion.
StoneX Inc: Insider Buying
Our records show that on 15 March, StoneX’s Head of Retail and Foreign Exchange, Glenn Stevens, bought 5,000 SNEX shares at a price of $63.45 per share. Following this on 16 March, StoneX's Chief Legal Officer, Diego Rotsztain, also bought 1,500 SNEX shares at a price of $63.68 per share. These purchases cost the insiders a total of around $410,000.
Large Insider Trade
These trades are worth highlighting for a couple of reasons. Firstly, they are large trades, both in both in nominal and relative terms. Our data shows that Stevens' purchase has increased the size of his holding by 33% while Rotsztain's trade has increased the size of his holding by 150%. This suggests that they are confident the stock is set to rise.
Secondly, Stevens’ last few purchases have been timed well. We can see that the insider made a number of purchases in mid-December at prices of between $50.79 and $53.19 per share. Since then, the stock has risen to $64.
It’s also worth noting that Stevens has significant experience in the financial services sector. Previously, he was the Founder and CEO of Gain Capital for over 20 years before it was acquired by StoneX in 2020. Given this experience, he is likely to know what he is doing.
37% Revenue Growth
StoneX posted a strong set of first-quarter results in February. For the quarter, operating revenues increased 37% to $380.1 million with retail revenues up 285% to $81.7 million. Meanwhile, net income was $19.5 million and diluted earnings per share were $0.98, up 20% and 17% respectively. Return on equity for the period was 10%.
"Q1 was a solid start to the new fiscal year with all our segments showing growth in both operating revenues and segment income, despite generally lower trending volatility and significantly lower interest rates,” commented Sean M. O’Connor, CEO of StoneX. “We have made good progress on integrating Gain, including realizing cost synergies, and are actively developing revenue synergy opportunities,” he added.
In light of these strong results, we see the insider buying here as a bullish signal.