In This Article:
Pacific Current Group Limited engages in multi-boutique asset management business worldwide. Pacific Current Group is one of Australia’s small-cap stocks that saw some insider buying over the past three months, with insiders investing in more than 1 million shares during this period. It is widely considered that insider buying stock in their own companies is potentially a bullish signal. A research published in The MIT Press (1998) concluded that stocks following insider buying outperformed the market by 4.5%. However, these signals may not be enough to gain conviction on whether to invest. I’ve analysed two possible reasons driving the insiders’ decision to ramp up their investment of late.
View our latest analysis for Pacific Current Group
Who Are Ramping Up Their Shares?
Over the past three months, more shares have been bought than sold by Pacific Current Group’s’ insiders. In total, individual insiders own over 6 million shares in the business, which makes up around 12.7% of total shares outstanding. .
The entity that bought on the open market in the last three months was
Perennial Value Management Limited. Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is Future Growth Outlook As Bullish?
On the surface, analysts’ earnings growth projection of -79.40% over the next three years provides poor outlook for the company, however, this is contrary to the signal company insiders are sending with their net buying activity. Digging deeper into the line items,Pacific Current Group is believed to experience negative growth in its top-line over the next year, which indicates the company may be facing some headwinds. This is expected to impact its bottom line next year given the large negative growth rate expected, indicating cost-cutting may not be able to pull it through into a positive growth region yet. Although, insiders seem to know something the market does not and have been ramping up their holdings in times of uncertainty. This indicates they may see a turnaround or deem the stock to be over-penalized by negative market sentiment.
Can Share Price Volatility Explain The Buy?
An alternative reason for recent trades could be insiders taking advantage of the share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. In the past three months, Pacific Current Group’s share price reached a high of A$7.08 and a low of A$5.76. This indicates some volatility with a share price change of of 22.92%. Perhaps not a significant enough movement to warrant transactions, thus motivation may be a result of their belief in the company in the future or simply personal portfolio rebalancing.