Insider Buys = Retailers On The Rise?

Sometimes, when reviewing the weekly roster of insider buys, patterns or similarities emerge. Multiple purchases in companies across an industry spectrum or a tight band within a specific sector. For example, retailers versus shoe retailers.

It could be a possible sign of good things to come from an industry or sector when insiders from different companies head to the open market to buy stock. Maybe the industry’s/sector’s underlying fundamentals are rising and potentially lifting the fortunes of all companies.

A broad range of retailers had some insider buying last week…

  • Advance Auto Parts, Inc. (AAP) (1)
  • 1-800-FLOWERS.COM, Inc. (FLWS) (2)
  • Foot Locker, Inc. (FL) (3)
  • Five Below, Inc. (FIVE) (4)

As you can see, it is a diverse set of retailers, from auto parts, to flowers, to athletic apparel, to discount items below $5.

Investors interested in the retail sector might consider something like SPDR S&P Retail ETF (XRT). XRT’s objective is to track the performance of the S&P Retail Select Industry Index (the “index”). It generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index.

The S&P Retail Select Industry Index comprises of stocks that are classified as Apparel Retail, Automotive Retail, Broadline Retail, Computer & Electronic Retail, Consumer Staples Merchandise Retail, Drug Retail, Food Retailers, and Other Specialty Retail sub-industries.

Of the four highlighted retail companies with insider buying, Five Below, Inc. (FIVE) is the most interesting, in our opinion. That’s because insiders usually do not buy it. In fact, there has only been one buy in the last seven years, and that was last week. (5)

President and Chief Executive Officer (CEO) Joel Anderson acquired 3,100 shares at $161.50. A total investment at little more than a half-million dollars. (6) Prior to the CEO’s recent buy, insiders sold more than $136 million in stock since 2016.

Five Below is a leading high-growth value retailer offering trend-right, high-quality products loved by tweens, teens, and beyond. Most items are priced between $1 and $5, and some extreme value items priced beyond $5. Founded in 2002 and headquartered in Philadelphia, Pennsylvania, Five Below today has over 1,400 stores in 43 states.

The half-million dollar buy was Anderson’s second purchase as an insider. In 2020, he bought 5000 shares of Sprouts Farmers Market, Inc. (SFM) for a total of $119,750. A little more than three years later, it’s worth $204,000, trading at $40.80 per share as of the close of trading on September 15, 2003.

Wall Street thinks Five Below’s President could be sitting on another winner with a one-year price target of $214.68. As of this keystroke, FIVE trades at $159.00 on the dot. Analysts expect the company’s top and bottom lines to grow nicely next year, as well. The street has consensus earnings per share (EPS) rising to $6.58 in fiscal 2025 (next year) from this year’s estimate of $5.44 per share. Meanwhile, revenue is forecasted to climb 17 percent, from $3.55 billion in fiscal 2024 to $4.15 billion next year. (8).

Overall: Insider buying across dispersed retailers could be a hint that the industry’s underlying fundamentals are on the upswing. Five Below, Inc’s (FIVE) one-year price target, earnings, and revenue projections could make FIVE and attractive holding for investors seeking exposure to the retail stocks.

Shares are only appropriate for investors with above-average risk tolerance and a time horizon through 2025.

Rich Meyers


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