Tracking hedge fund and insider transactions is crucial to our investment strategy. Our research has shown that the 15 most popular small-cap stocks among hedge funds historically have outperformed the overall market (see the details). In addition, recent studies on insider trading have shown that investors can outperform the market by 7 percentage points by following certain insider purchases.
In this article I will look into two small-cap companies in the Cyclical Consumer Goods & Services sector that have witnessed insider purchases over the past few weeks, despite the fact that they both trade above their industry average valuations.
Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) is a $543 million market cap specialty retailer of natural and organic groceries and dietary supplements that has been delivering average revenue growth above 23% over the past five years (compared to an industry mean of 1%-2%). This kind of growth has led to one of the highest valuations in the grocery stores industry: the stock trades at 42.4 times the company´s earnings, well above the 11.2x P/E industry mean. Nonetheless, four insiders bought the company´s stock over the past few days.
On May 6, Kemper Isely, Chairman and Co-President, purchased 10,000 shares of Common Stock for an average price of $23.93 per share, and now owns 3,107,402 shares of the company. On that same date, Richard Halle, Board Director, acquired 4,000 shares of the company; 2,000 of them for $23.78 per share, and another 2,000, for $23.96 per share. Mr. Halle now holds 10,064 shares of Natural Grocers.
The following day, Edward Cerkovnik, Board Director, started a position in the stock with 3,500 shares, for which he paid prices ranging from $22.63 per share to $22.73 per share. In addition, Elizabeth Isely, Executive Vice President and 13D Group Member, bought 10,000 shares of Common Stock, for prices ranging from $22.54 to $22.74 per share, inclusive, and now owns around 1.26 million shares. Other investors worth mentioning are Donald Chiboucis, Richard Driehaus and Israel Englander, all of which hold millionaire stakes in the company.
The second company in this list is Superior Industries International Inc. (NYSE:SUP), a $531 million market cap designer and manufacturer of aluminum road wheels, which are sold to original equipment manufacturers (automobile and light truck manufacturers). Despite its razor thin margins and returns, and an above average valuation, Donald Stebbins, President and CEO, acquired 12,500 shares of Common Stock on May 7. He paid $19.40 per share and now owns 145,000 shares of the company. In addition, several prominent investors are also betting on this company. Amongst them we can count Mario Gabelli, with 2.30 million shares, and Chuck Royce, with approximately 495,000 shares.
Disclosure: Javier Hasse holds no position in any stocks mentioned