Top-level corporate insiders tend to have an in-depth understanding of their companies. If these insiders are buying company stock, it’s a sign that they’re confident about the future and that they expect the company’s share price to rise.
In this report, we are going to highlight some bullish insider buying at Volex PLC (VLX:LN). Volex is a UK-based company that supplies power cords to a range of markets. It’s listed on the Alternative Investment Market (AIM) of the London Stock Exchange and currently has a market capitalization of £384 million.
Volex: director dealing
Insider transaction data on Volex shows that recently, Executive Chairman Nat Rothschild has purchased a large number of shares. Our records show that on 12 November, the insider acquired 100,000 VLX shares at a price of £2.53 per share. The total cost of the transaction was £253,000.
Source: 2iQ Research
High insider IQ
This insider purchase is worth highlighting for a couple of reasons. Firstly, it’s a relatively large purchase. This indicates that the insider is confident about the future.
Secondly, Rothschild has a good track record when it comes to timing his purchases. After he last purchased stock, in late August 2020 (500,000 shares @ £1.65 per share), the stock rose more than 50% in the next three months. Our model gives the insider a high long-term trading IQ of 112.
Strong H1 results
Volex recently posted a strong set of first-half results. For the six months ended 4 October 2020, revenue was up 3.5% to $202.5 million while underlying diluted earnings per share were up 52% to 12.9c. Sales of power products for use in electric vehicles rose 78% year on year. The interim dividend was increased by 10% to 1.1p per share reflecting the group’s confidence in the ongoing prospects of the business.
“Having delivered a robust performance in the first half of the year, coupled with a strong forward order-book, the Board remains confident in delivering on full-year expectations,” said Rothschild. “The longer-term prospects for our business remain strong and we continue to invest in increasing capacity in our key facilities to meet customer demand and to implement vertical integration to improve our competitiveness and profitability,” he added.
In light of this performance and the confident tone from management, we see the insider buying here as a bullish signal. It indicates that the Chairman expects the stock to keep rising.