What happened
Shares of fresh produce company Calavo Growers (CVGW +0.00%) -- best known for its avocados -- soared this week. Investors were surprised to see a director and the CEO buying shares on the open market. And that's why the Calavo Growers stock was up almost 18% for the week, prior to the market opening on Friday, according to data provided by S&P Global Market Intelligence. For comparison, the S&P 500 was up less than 1% during this time.
So what
It's not uncommon to see insiders gobbling up shares of their own companies. However, seeing them buy shares at market prices is far less common -- usually, they get shares at a discount through employment agreements. But Calavo Growers is the latter scenario here.
NASDAQ: CVGW
Key Data Points
Last Friday, Calavo Growers director Steven Hollister disclosed his purchases. And on Monday, CEO Lee Cole disclosed his. For his part, Hollister bought 2,000 shares at $30.59. And Cole bought 37,500 shares at $29.94 before buying 37,500 more shares at $30.74.
As investing great Peter Lynch said, "The insider has only one reason to buy: to make money." And when investors see insiders use their own money to buy, they interpret it as an extremely bullish signal. After all, who has better information on Calavo Grower's prospects than one of its directors and the CEO himself?
Now what
Speaking of the CEO, Cole was brought back to Calavo Growers in the second quarter of 2023. He served as CEO from 1999 to 2020, and it was a market-beating stock during his tenure.
Calavo Growers is a complex business -- in Q2, sales volume for its avocados was up, but its revenue was down due to lower avocado prices, which is outside of its control. This naturally hurts profit margins as well. That said, the business did show sequential improvement from the first quarter.
Regarding the sequential improvement, Cole said, "With the improvements we're making to the business, I'm optimistic about the second half of the year and feel confident that we're putting Calavo back on track for long-term success." And he's certainly backing this belief up with those big insider purchases.
