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Why Are Insiders Loving These Small-Cap Advertising Companies

Over the last week, insiders at two small-cap advertising companies, Tremor Video Inc (NYSE:TRMR) and Millennial Media, Inc. (NYSE:MM), have been eating up their stock. Since insider purchases reflect, on many occasions, high levels of insider confidence, the transactions and companies deserve a closer look, in order to elucidate if they stand as interesting investment opportunities.

Insider Trading 3

Tremor Video

Tremor Video Inc (NYSE:TRMR) is a provider of video advertising solutions across diverse internet-connected devices. On the days that followed the company’s 10Q filing, on Nov. 14th, eight Form 4s were presented at the U.S. Securities and Exchange Commission. Six different insiders purchased stock from the firm, including its President and CEO, C William Day, who acquired 15,000 shares in a few days, at prices between $3.69 and $3.90 per share. Stock trades at around $4.20 currently, already providing a considerable upside for these insiders.

Most of them are probably betting on growth, since the company’s current margins and returns are not yet positive. With most price targets above $8 a piece, it seems like an attractive entry point is open.

Millennial Media

Millennial Media, Inc. (NYSE:MM) is a mobile advertising platform company. After it filed its 10Q report at the SEC, six insiders purchased its stock. Amongst them we can find two Executive Vice Presidents and one Senior Vice President. However, the most relevant acquisition could be the one made by Millennial´s President and CEO, J. Paul Palmieri, who added 10,000 shares to the 4,786,770 that he already held. He paid an average of $5.922 per share, and his holdings now amount to approximately $30 million.­

Reasonably valued while offering an industry leading revenue growth history (over the last 3 years, at least), this stock looks like an interesting investment option, and one can understand why insiders are betting on it. Analysts are also quite bullish about Millennial Media: consensus estimates point towards average annual EPS growth rates around 45% (triple its industry average) for the next five years to come.

Hedge Fund Bulls

Interest in small-cap companies among hedge funds is quite common, mainly because their stock is more likely to be mispriced than larger-cap, more closely-followed companies. We track several small-cap stock picks among hedge funds and, on average, they widely outperformed the S&P 500.

Amongst Millennial Media, Inc. (NYSE:MM)´s largest hedge fund bulls are

  • Spencer M. Waxman‘s Shannon River Fund Management, which owns 1.8 million shares
  • George Soros‘ Soros Fund Management, holding 800,000 shares
  • Jim Simons‘ Renaissance Technologies, with 433,400 shares

Tremor Video Inc (NYSE:TRMR), on the other hand, has a market cap slightly below $250 million, so it technically qualifies as a micro-cap company. In consequence, big hedge funds are not as interested. However, Steven Cohen’s Sac Capital Advisors holds a small position in the company. This, added to the strong insider activity, provides some backup for a potential investment.


Disclosure: Javier Hasse holds no position in any stocks mentioned

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