Large insider purchases at small companies are often worth investigating further. Smaller companies are less researched than larger businesses, meaning that they offer greater potential for ‘surprises’ that can lead to outperformance.
In this report, we are going to highlight some interesting insider buying activity at a small US-listed company, Friedman Industries Inc (FRD:US). Friedman Industries is a Texas-based manufacturer of flat roll and tubular steel products. It is listed on the NYSE American stock exchange and currently has a market cap of around $132.3 million.
Our data shows that on July 25, board member Durga Agrawal purchased 5,000 FRD shares at a price of $16.32 per share. This trade cost the insider $81,600 and increased his holding to 25,863 shares.
Buying Near All-time Highs
Insiders at Friedman Industries have made well-timed purchases in the recent past. For example, back in October last year, a number of insiders (including Mr. Agrawal) bought stock when it was trading near the $8 level. Since then, the stock has more than doubled in price.
What’s interesting about Mr. Agrawal’s recent purchase is that it is near the stock’s all-time highs. This indicates that the insider is very confident in relation to the company’s prospects. It’s worth noting that Mr. Agrawal has served on the board since 2006 so he is likely to know the company very well.
Strong Full-year Results
Friedman Industries recently posted a strong set of Q4 and fiscal year 2023 results.
For the quarter ended March 31, 2023, sales were up 65% while earnings per share came in at $0.86 versus a loss of $1.11 a year earlier.
Meanwhile, for the year, sales were up 92% with earnings per share amounting to $2.91 compared to $2.04 a year earlier. This was the best performance, from a profitability perspective, in the company’s history.
“Strong fourth quarter results put an exclamation mark on a monumental fiscal year for Friedman,” commented Michael J. Taylor, President and CEO.
Looking ahead, management was confident that the strong momentum will continue.
“We expect strong performance for our first quarter of fiscal 2024, providing a good foundation as we aim to deliver record earnings for three years in a row,” said Mr. Taylor.
“Overall, the company expects the first quarter to be one of the more profitable quarters in company history,” he added.
In light of the momentum the company has right now, we see the insider buying here as a bullish development.