Insider purchases can provide great investment ideas that go beyond your usual options. Let’s, thus, take a look at two small-cap companies that saw their insiders buy their stock.
First off, I’d like to look into Francesca’s Holdings Corp (NASDAQ:FRAN), a $759 million market cap retail boutiques operator in the U.S. Its business operations are conducted through its wholly owned indirect subsidiary, Francesca’s Collections, Inc. On April 3rd, Mark Vendetti, Chief Financial Officer, acquired 4,000 shares of the company’s Common Stock, for $19.58 per share. He now owns 8,000 shares of the company.
Although the stock is down about 7% since Mr. Vendetti’s purchase, upside potential is plenty. For the short/medium-term analysts expect the stock to reach a price of $22.81 per share, delivering EPS growth rates around 15%-16% over the next couple of years. In addition, they expect this growth rate to maintain over the long-run (5 years), outperforming its industry by approximately 15%. Boasting industry leading margins and returns and an amazing growth history, this certainly looks plausible. Moreover, a wide institutional sponsorship should provide confidence for those investing in the stock. Jim Simons, Ken Griffin, D. E. Shaw, and Mariko Gordon are some of the investment gurus betting on this firm.
The other company on this list is Gladstone Commercial Corporation (NASDAQ:GOOD), a $313 million market cap real estate investment trust that focuses on investing in and owning net leased industrial and commercial real property, and on making long-term industrial and commercial mortgage loans. Although margins and returns do not look particularly good in this case, the company’s President, Robert Cutlip, seems to feel confident about its future. On April 3rd, Mr. Cutlip acquired* 500 shares of Common Stock for $17.67 per share. Following this transaction, the insider owns 10,500 shares of the company.
Despite the aforementioned weak fundamentals, Mr. Cutlip’s purchase can be understood as both an income and a long-term investment. The company pays out 8.56% of the current stock price in the form of quarterly dividends. In addition, EPS growth prospects certainly look better than those of its peers: analysts expect it to deliver EPS growth of 27.30% in FY 2014, and of 68.80% in FY 2015. Just like Mr. Cutlip, John Overdeck, David Siegel and D E Shaw also seem to like this stock. Do you?
* “The sales reported in this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on March 10, 2014” (SEC).
Disclosure: Javier Hasse holds no position in any stocks mentioned