She Bought At The Low And Sold At The High

If a company is potentially a good buy and nobody knows about it, is it a good buy?

One of the great benefits of reviewing insider buys is learning about unfamiliar companies. With 1000s and 1000s of publicly traded companies, there are many anonymous companies that might be excellent opportunities, but it’s impossible to know them all. It’s the investors’ version of if a tree falls in the forest and no one is around to hear it, does is make a noise?

Live Oak Bancshares, Inc. (LOB) is the tree. Let’s go into the forest.

Live Oak is a digital, cloud-based bank serving small business owners in all 50 states. LOB is a leading USDA B&I lender and the #1 SBA 7(a) lender by dollar volume* in the country and our mission is to be America’s small business bank. Live Oak aims to fulfill that mission through banking products that help business owners buy, build and expand, along with FDIC-insured high-yield savings and CDs to grow their hard-earned money.

Unless you have a relationship with Live Oak, you’ve probably never heard of it either. We learned of the company thanks to LOB Director Diane Beth Glossman. The director bought 2,000 shares at $38.25 for $76,500. Not the biggest buy according to most money measuring sticks. However, Director Glossman bought 2,000 shares once before in January 2019. She purchased the stock at $13.87 per share. (1)

Glossman’s prior buy came after the stock slid from a little more than $30. Minus the Covid crash, her purchase was damn near the bottom. Subsequently, the Director sold 7,500 shares in November 2021 at $97.90, not that far from the 52-week high of $99.89. Although, Glossman’s buys and sells are smaller than many, her timing has been impeccable.

The director appears to be following the same playbook as LOB’s stock traded at $43.72 as recently as August 15, 2022. Much like the overall market, Live Oak has taken a hit since mid-August.

We found a couple of interesting and positive financial highlights in reviewing Live Oak Bancshares’ most recent quarterly report.

  • Year over Year (YOY) Cash and due from banks grew to $580,493,000 from $187,203,000 (2)
  • YOY Total Deposits jumped from $6.5 billion to $8.155 billion (3)
  • YOY Total Revenue increased to $208.4 million from $141.5 million
  • YOY Net Income for Q2 22 was $2.16 compared to $1.41 in Q2 21

Financial expectations are mixed as earnings are forecasted to dip to $2.57 next year from $4.06 in 2022. However, revenue is slated to rise to $474.84 million in 2023 from $414.7 million this year.

These numbers are not lost on Wall Street as analysts have a consensus one-year price target of $43.25. (4) As we type, the LOB trades at $33.84; shares have 27.81% upside to target, not including the 0.35% ($0.12) dividend yield.

OVERALL: Live Oak Bancshares, Inc. (LOB) might be a tree in the woods, but there are some financial positives and negatives. That’s probably why analysts have a one-year price target less than half of its 52-week high. Investors need to balance Director Diane Beth Glossman’s limited, but uncanny, ability to buy at the bottom and sell at the top.

LOB is only appropriate for investors with above-average risk and a time horizon of at least 12 months.

 

1 – https://www.secform4.com/insider-trading/1545352.htm

2 – https://investor.liveoakbank.com/static-files/f54c63ec-cb2c-468f-99d0-85601fc36227

3 – https://investor.liveoakbank.com/news-releases/news-release-details/live-oak-bancshares-inc-reports-second-quarter-2022-results

4 – https://finance.yahoo.com/quote/LOB?p=LOB

* The data supplied by the SBA reflects 7(a) highest dollar volume during FY 2021. The data supplied by the USDA for the highest dollar volume during FY 2020.