Following insider buying at smaller companies can be a very profitable trading strategy. Smaller companies are not as closely followed as larger businesses, meaning that they offer greater potential for outperformance.
In this report, we are going to highlight some interesting insider buying at a small US-listed company, Bioventus Inc (BVS:US). Bioventus is a medical device company that is focused on pain treatments, restorative therapies, and surgical solutions. It is listed on the Nasdaq and currently has a market cap of around $231.03 million.
Insider Buying at Bioventus
2iQ’s insider transaction data shows between May 19 and May 22, board member John Bartholdson reported a purchase of around 1.32 million BVS shares at an average price of $2.01 per share by his closely associated investment firm Juniper Investment Company, LLC. This trading activity cost the firm just under $2.6 million and increased the firm’s holding by approximately 29%.
What stands out here is that Mr. Bartholdson has increased the size of Juniper’s holding by nearly 29%. The fact that he has upped his stake by such a large percentage indicates that he is very confident the stock is undervalued. Our Insider Model views the trading activity as bullish.
It’s worth noting that between May 23 and May 25, acting CEO Tony Bihl and Chairman William Hawkins also purchased stock. Our records show that they picked up 213,000 shares at an average price of $2.56 per share. However, this trade may have been related to his contract.
Wound Business Divested
Bioventus stock has been moving higher recently after the company announced that it would be divesting its Wound business.
The company told investors that it had signed a definitive agreement to sell this area of the business to LifeNet Health for a total cash consideration of $85 million ($35 million in cash at close, a $5 million cash payment deferred 18 months, and $45 million in potential earn-out payments). It expects to net approximately $30 million after fees and expenses at the time of closing, which will be used to repay existing debt.
“The sale of our Wound business will enhance our liquidity and enable a greater focus on execution,” said Mr. Bihl.
The sale of the Wound business is not the only positive development here recently, however. Another is that Mr. Bihl – who previously served as CEO of Bioventus LLC from 2013 until his retirement in 2020 – has returned to the helm in the short term. In Bioventus’ recent Q1 results, Mr. Bihl said that he is confident in the company’s ability to drive revenue and earnings growth.
“Our improved execution and results, combined with the divestiture of our Wound business, position us to deliver meaningful improvement in Adjusted EBITDA and enhance liquidity as we progress throughout the year,” he said.
In light of the recent developments here, we see the insider buying as a bullish indicator.