Following insider buying at smaller companies can be a very profitable trading strategy. Smaller companies are less researched than larger businesses, meaning that they offer greater potential for outperformance.
In this report, we are going to highlight some interesting insider buying at The Children’s Place (PLCE:US), a small-cap company listed in the US. The Children’s Place is a children’s specialty apparel retailer that owns a range of brands including The Children’s Place, Place, Baby Place, Gymboree, Sugar & Jade, and PJ Place. It trades on the Nasdaq and currently has a market cap of around $325.14 million.
Our data shows that on July 5, President and CEO Jane Elfers purchased 43,000 PLCE shares at a price of $23.70 per share. This trade cost the insider approximately $1.02 million and increased her holding to 370,033 shares.
Ms. Elfers has over 30 years of experience in the retail industry. She joined The Children’s Place as President and CEO in January 2010 and since then, has played a major role in the company’s expansion into new markets. Before this, she served as President and CEO of Lord & Taylor, where she transformed the brand and saved it from extinction. Given her background, she is likely to have a good understanding of her company’s prospects.
It’s worth pointing out that Ms. Elfers has a good track record when it comes to stock purchases and sales. Our model gives the insider a short-term Trading IQ of 118, which is very high.
Significant Cost Reductions
The Children’s Place recently announced that it will be reducing its workforce in an effort to manage costs. The company said that it will reduce about 17% of its salaried positions, representing 181 employees, the majority of whom are located in Secaucus, New Jersey. The market clearly liked this development, as the news sent the shares up more than 5%.
Workforce reductions aren’t the only way The Children’s Place is reducing its expenses, however. In its Q1 results, the company advised that it permanently closed 14 stores in the first quarter of 2023. It added that it plans to close between 80 and 100 stores this year as part of its store fleet optimization initiative.
Given the significant cost reductions here, we see the insider buying as a bullish development.