Why Shares of Forterra Inc Popped 24% Today

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What happened

Shares of pipe and infrastructure company Forterra Inc's (NASDAQ: FRTA) stock jumped as much as 24.1% in trading Tuesday after seven insiders bought the stock. Shares settled slightly lower as the trading day continued, but shares were still up 19.2% at 11:20 a.m. EDT.

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So what

Officers and directors Lori Browne, Vikrant Bhatia, Kevin Barner, Clinton McDonnough, Kyle Volluz, Jeff Bradley, and Chris Meyer bought a total of 167,800 shares on Sept. 11, showing a management team bullish on the company's future. We don't know exactly why all of these insiders bought shares at the same time, but it has given traders a reason to bid shares higher on Tueaday.

It's possible, and even likely, that Forterra will see a big increase in demand over the next few years as Houston and most of Florida rebuild and install more water management systems. The challenge for investors is not knowing what the impact of increased demand will be until the quarter is over and management gives guidance for the rest of 2017 and into 2018. Shares may be in a volatile pattern until more information comes out.

Now what

Given the fact that these buys followed a huge jump in shares last week, I think investors should assume that insiders know a surge in revenue is coming. But the market may be getting ahead of itself in bidding shares higher. In last quarter's earnings report management said costs would be higher than expected this year and pushed back expected margin improvements. Forterra needs to show it's going to improve operations before I jump in and next quarter's conference call will take on increased importance as a result.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.