Research shows that following insider buying in small-cap firms tends to be a more profitable strategy than following insider buying in larger firms. Smaller companies are less researched than larger companies, meaning that they offer greater potential for ‘surprises’ that can lead to a better performance.
With that in mind, today we are going to highlight insider buying at a UK small-cap company, Supply@ME Capital (SYME:LN). Supply@ME Capital is an early-stage FinTech company that offers a platform for inventory monetization. The company is listed on the Alternative Investment Market (AIM) of the London Stock Exchange and currently has a market capitalization of £229 million.
In August, we observed several interesting insider purchases at Supply@ME Capital. On 17 August, CEO Alessandro Zamboni purchased 1.63bn SYME shares at a price of 0.6756p per share. Then, on 19 August, Chairman Dominic White purchased 220m shares at a price of 0.7000p per share.
Finally, on 27 August, Zamboni purchased another 660m shares at a price of 0.6945p per share. Overall, these insiders spent around £17 million on Supply@ME stock.
Source: 2iQ Research
This insider buying activity stands out to us for several reasons. Firstly, these are substantial transactions. Zamboni’s purchases, in particular, are very large, both from a nominal and relative perspective. They have increased the size of his holding by 37%.
Secondly, it’s encouraging that both the CEO and the Chairman have purchased shares. Multiple insiders buying is generally a positive development.
Supply@ME Capital issued an encouraging trading update in July. It advised that client companies already originated and awaiting inventory funding stands at 97, up from 66 at 31 December 2019. It also said that discussions with a large UK financial institution relating to a UK inventory monetization pilot program are progressing. The aim is to start the pilot by the end of 2020.
All things considered, we see the recent insider buying at Supply@ME Capital as bullish. That said, the stock is up more than 300% over the last three months, so there is the risk of a near-term pullback.