Insiders at smaller firms often earn large profits from their stock purchases. This is due to the fact that less resources are committed to analyzing smaller companies which often results in them being priced less efficiently compared to companies with larger market capitalizations.
Here, we are going to highlight insider trades at a small UK company, Watkins Jones PLC (WJG:LN). Watkins Jones is a leading property developer and property management company that is focused on the rental market. It is split into four segments: Student Accommodation, Build to Rent, Residential and Accommodation Management. It’s traded on the London Stock Exchange’s AIM market and currently has a market capitalization of £592 million.
Watkins Jones PLC: Insider Buying
Regulatory filings show that on 22 July, Chairman Elect Alan Giddins purchased 64,000 WJG shares at a price of £2.30 per share. This purchase cost the insider approximately £150,000. Then, on 28 July, the Independent Chairman of the Board, Grenville Turner, purchased 87,000 WJG shares at a price of £2.30 per share. This cost the insider around £200,000 and increased his holding by 25%.
Our data shows that this is the first insider buying at the company for close to a year. It is therefore significant that two key insiders are buying company stock in close proximity to each other. This suggests that there’s a consensus view that the stock is undervalued at present.
It’s worth noting that both of these insiders have a financial background. Turner has over 40 years of business experience and has had numerous roles within the retail banking and property sectors. He has been Chairman and Chief Executive at Countrywide PLC, Chairman of ThreeSixty Developments and a Non-Executive Director of both Rightmove PLC and Zoopla Property Group PLC. He also has vast experience at board level in other sectors.
Meanwhile, Giddins previously served as Managing Partner and Global Head of Private Equity at 3i Group PLC. Giddins also spent 13 years in investment banking where he advised a number of listed businesses. This experience means that these insiders are likely to have extensive experience in valuing companies.
The Covid-19 pandemic halted growth at Watkins Jones, however, the company recently produced a resilient set of half-year results that were only slightly below the half-year 2020 results. For the period, revenue amounted to £178.4 million, down just 3.9% compared to the year prior, while EBITDA came in at £33.4 million, down just 2.5% year on year. Net cash came in at a healthy £31.7 million. Looking ahead, the company was positive on its development pipeline with £1.6 billion future revenue value in the pipeline, up from £1 billion in the year before.
"All parts of the business have continued to perform well, and whilst our profit for the first half of the year was slightly below last year, this was because the first half last year was largely before the onset of the disruption caused by the pandemic. The fundamentals supporting the markets for high quality build to rent and student accommodation assets remain strong, driving growing institutional demand, and combined with the continued progress we have made in the first half of the year, gives us confidence in our future trading," said Richard Simpson, Chief Executive of Watkins Jones.
After reading the confident outlook statement we see the recent insider buying at Watkins Jones as bullish. It suggests that the two insiders see upside in the share price and believe that the company will experience healthy growth in the future.