12-month performance: -32% Insider activity: Bullish Buying pattern: Purchases from multiple directors including CEO and Chairman Recent news: Solid full-year results
Craneware is a UK-based technology company that is engaged in the development, licensing, and ongoing support of computer software for the healthcare industry. Providing a range of technological solutions, the group helps healthcare providers enhance efficiency and optimise financial performance. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £594 million.
While Craneware shares have had an excellent run over the last few years, they have pulled back significantly since a trading update in late June, in which the group advised that sales for the second half of the year ended 30 June were lower than anticipated. Full-year results were far from a disaster, however, with revenue increasing 6% for the year and adjusted EBITDA rising 11%. CEO Keith Neilson also advised that the company has started the new financial year with an “uptick in sales momentum.”
Source: 2iQ Research
Analysing insider transaction activity, we think the recent share price fall has provided a buying opportunity. We say this because since the group’s final results five Craneware directors have purchased shares, which, in our view, is a bullish signal. Those buying have included CEO Neilson as well as Chairman George Elliott – who are both likely to have an excellent understanding of the group’s future prospects. With the CEO recently stating that management is looking forward to the coming years with confidence, and multiple directors buying shares, we think the outlook for the stock is favourable.
Agilysys (AGYS: US)
12-month performance: +70% Insider activity: Bullish Buying pattern: Purchases from CEO Recent news: Good Q1 results
Agilysys is a leading provider of hospitality software and solutions for hotels, resorts and restaurants. Offering solutions across fixed and mobile point of sale, property management, inventory and procurement, and food and beverage operations, the group helps hospitality companies drive revenue, loyalty, and operational efficiencies, and its clients include Hilton, MGM Resorts, and Caesars Entertainment. The stock is listed on the NASDAQ Global Select Market and currently has a market capitalisation of $659 million.
Agilysys shares have performed well over the last year, rising around 70%. Strong revenue growth has been the main driver of the share price rise, with the group generating five consecutive quarters of record revenue. In the company’s most recent results for the first quarter of fiscal 2020, revenue increased 12.9%, and the company advised that free cash flow this year will be significantly higher than last year.
Source: 2iQ Research
Looking at insider transaction activity, we think the shares have the potential to keep rising. We say this because over the last two-and-a-half months, CEO Ramesh Srinivasan has purchased approximately $522,000 worth of Agilysys shares, which indicates he is confident about the future. His most recent purchase, on 4 September, was at a share price of $25.13, which suggests he sees value at that price. Given that Srinivasan is likely to have strong insight into the company’s future prospects as the CEO, we see his purchases as a bullish signal. With the company continuing to grow its top line, and the CEO buying a substantial number of shares, we think the uptrend here has further to run.
Overstock.com (OSTK: US)
12-month performance: -41% Insider activity: Bearish Selling pattern: Large sales from Former CEO/Founder Recent news: CEO left the company
Overstock.com is an online retailer that sells a wide range of goods including furniture, housewares, jewellery, apparel, and health and beauty products. Originally founded in 1997 by Robert Brazell as D2: Discounts Direct, the group was sold to Patrick Byrne two years later, who renamed it Overstock.com. The stock is listed on the NASDAQ Global Market and currently has a market capitalisation of $549 million.
Overstock.com has made headlines recently after CEO Patrick Byrne quit the company in August. Byrne disclosed that he had been in a romantic relationship with Maria Butina – who has been accused of being a Russian spy and was recently sentenced to 18 months in prison – and said that his continued presence was complicating the company’s business relationships. “My presence could — and likely would — be disruptive to strategic conversations that are occurring, one of which is with my most preferred suitor in the entire industry,” he told The New York Times.
What’s particularly interesting about this story is the insider transaction activity. Between 16 September and 18 September, Byrne – who previously owned around 13% of Overstock.com shares – dumped his entire holding in three large sales, with each sale occurring at a lower price. In total, he sold approximately $90 million worth of stock and in a blog post entitled ‘A Message to My Former Colleagues at Overstock,’ Byrne said that he was planning to reinvest the proceeds of the sales into securities that are “counter-cyclical to the economy,” including gold, silver, and cryptocurrencies.
Source: 2iQ Research
Given that Byrne had been at the helm of Overstock.com for around 20 years, we view his selling activity as a bearish signal. The fact that he sold his stock in such a hurry, at lower and lower prices, does not look good, in our view. It’s also worth noting that short interest in Overstock.com is high at present too, which is another bearish signal. Given the ex-CEOs unusual selling activity, and the high level of short interest, we think there is risk to the downside here.
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