Small and micro-cap tech companies can provide great returns for those bold enough to bet on them. However, choosing one to invest in is quite a difficult task. Insider purchases can help us decide, as they can be interpreted as a strong bullish sentiment from someone who has inside information on the company´s operations, and is betting on it instead of diversifying its stakes.
Over the past weeks, two IT service providers, Carbonite Inc (NASDAQ: CARB
) and PFSweb, Inc. (NASDAQ:PFSW
), have been experiencing some noteworthy insider activity. Let´s take a closer look in order to elucidate if they could help you find a value
investment in any of these two stocks:
A Small-Cap Option
Carbonite Inc (NASDAQ:
CARB) is a developer and provider of online accessible
computer backup software with a market cap of approximately $323 million. Over the last couple of weeks, following the release of its 8-K report on Nov. 12th
, its CEO and President, David Friend
, and one of its Board Directors, Todd Krasnow
, added stock
to their portfolios
Mr. Friend bought 58,871 shares on Nov. 12th
: 11,249 for $2.64 each, using stock options he held; 44,063 for $9.62 per share; and 3,559 for $10.26 a piece. On top of this, he used some more of his stock options on Nov. 14th
, and added 3,751 shares to his portfolio for $2.64 each. He now holds 969,762 shares, worth roughly $11.9 million.
Krasnow also acquired Carbonite Inc (NASDAQ:
CARB) shares lately. On Nov 20th
, he purchased 37,000 shares in multiple transactions at prices ranging from $11.04 to $11.50, inclusive. He now owns (counting directly and indirectly owned stock) 294,771 shares of the company.
A Micro-Cap Option
, Inc. (NASDAQ: PFSW) provides integrated eCommerce and business process outsourcing solutions to developing countries. Its market cap barely surpasses $140 million. However, insiders do not seem to care about its size. After the company reported its third quarter 2013 results, on Nov. 15th
, F James Reilly
, Director of the Board, and Transcosmos Inc.
, large shareholder, added stock to their holdings.
Mr. Reilly bought 20,000 shares on the day that the 8-K form was filed at the SEC. He paid an average price of $7.54 per share; the stock is already trading at around $8.59. Following the reported transaction, the board director owns 40,512 shares of the company.
On the other hand, Transcosmos bought 3,578 shares on Nov. 15th
, for an average price of $7.4785 each. The shareholder continued to increase its stake in the company, and added stock again on Nov 19th
(400 shares), 20th
(16,904) and 21st
(7,274) on prices ranging from $7.50 to $8.00 per share. Transcosmos now owns 3,242,525 shares, valued at about $27.5 million.
Hedge Fund Bulls
In addition to insiders, hedge funds also seem to be quite into these IT companies. For instance, Jim Simons
´ Renaissance Technologies is the largest “hedgie” bull on PFSweb, Inc. (NASDAQ:
PFSW) -holding about $3 million worth of shares- and the fourth largest bull on Carbonite Inc (NASDAQ:
CARB), with about $2 million in shares. Matthew Drapkin and Steven R. Becker
´s Becker Drapkin Management is also placing big bets on PFSweb. Its holdings, worth about $2 million, account for almost 1.5% of its portfolio.
Back to Carbonite: amongst the hedge funds that we track, two are particularly bullish on this company. Seymour Sy Kaufman and Michael Stark
´s Crosslink Capital owns about $26 million in shares, and Mark N. Diker´s
Diker Management, another $15 million.
After reviewing these positions, one question emerges: if insiders and hedge funds are betting on these small-cap IT services firms, should you?
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