Insider transaction research shows that insiders at small firms tend to earn greater profits from their stock purchases than insiders at large firms. One reason for this is that smaller companies don’t have as many analysts covering them, meaning that they are often less efficiently priced.
In this report, we are going to highlight some interesting insider buying at a small British company, Volex PLC (VLX:LN). Volex is a manufacturing company that specializes in power products. Its products are used in laptops, PCs, tablets, printers, TVs, games consoles, power tools, kitchen appliances, and electric and autonomous vehicles. It is listed on the Alternative Investment Market (AIM) of the London Stock Exchange and currently has a market capitalization of £690 million.
Volex PLC: Insider Buying
Our data shows that on October 11, 2021, Executive Chairman and major shareholder Nat Rothschild bought 60,000 VLX shares at a price of £4.18 per share. This purchase – his first in 2021 – cost the insider £250,800.
Insider Trading Skill
This trade caught our attention due to the fact that last year, Mr. Rothschild made a number of purchases that were timed exceptionally well.
On November 12, 2020, for example, he picked up 100,000 shares at a price of £2.53 per share. Since then, Volex stock has risen nearly 75%.
Meanwhile, on August 25, 2020, he bought 500,000 shares at a price of £1.65 per share. Since then, the stock has risen 165%.
The August trade made our list of top insider buys for 2020.
Positive AGM Statement
The most recent trading update from Volex was very positive.
At the company’s AGM in late July, the group advised that the levels of customer demand it experienced in the second half of FY2021 had continued into the first quarter of FY2022 and that performance in Consumer Electricals remained very strong.
It added that its Medical and Complex Industrial Technology customers were experiencing a healthy recovery in areas where there had been reduced demand in FY2021 due to challenges imposed by the pandemic, and that revenues in its Electric Vehicle segment continue to grow.
On the back of the strong performance in Q1, the company said that it was expecting to deliver full-year underlying operating profit slightly ahead of the market’s expectations.
Since this update, analysts at HSBC have raised their target price for the stock to 540p from 445p. That’s 23% higher than the current share price.
In light of these developments, we see the insider buying here as a bullish indicator.