3 Undervalued European Small Caps With Insider Buying Amid Market Downturns

In a market environment marked by geopolitical uncertainties, inflationary pressures, and volatile trade dynamics, European small-cap stocks have emerged as a compelling arena for value hunters. While the broader STOXX Europe 600 Index has struggled to gain traction, a select group of small-cap companies has attracted attention due to their robust fundamentals and insider buying activity. These stocks, often overlooked by institutional investors, offer a unique opportunity to capitalize on undervaluation and management confidence during market downturns.

1. MJ Gleeson (LSE:GLE): Urban Regeneration at a Discount

Industry: Urban regeneration and land development
Market Cap: £0.36 billion
P/E Ratio: 13.7x
Insider Buying: Insiders purchased shares in early 2025, signaling confidence in the company's long-term strategy.

MJ Gleeson operates in the UK's residential property development sector through its Gleeson Homes and Gleeson Land divisions. Despite a declining gross profit margin (22.32% in December 2024), the company's projected annual earnings growth of 17.93% and its focus on high-demand urban regeneration projects position it as a growth candidate. The Simply Wall St Value Rating of ★★★★★★ underscores its strong valuation metrics.

Key Drivers:
- Urban Demand: Gleeson Homes generated £343.33 million in revenue in 2024, leveraging UK housing shortages.
- Strategic Leadership: Fiona Goldsmith's appointment as Chair in July 2025 adds stability to the management team.
- Debt Funding: While reliance on external borrowing increases risk, the projected earnings growth justifies the leverage.

2. Picton Property Income (LSE:PCTN): Real Estate Turnaround Story

Industry: Real Estate Investment Trust (REIT)
Market Cap: £0.46 billion
P/E Ratio: 11.3x
Net Income: £37.32 million in FY2025 (up from a prior loss)

Picton Property Income has transformed its financial performance through a strategic shift toward industrial properties, a sector benefiting from e-commerce-driven demand. The company's recent £50 million revolving credit facility with NatWest and a 2.7% dividend increase reflect its improved liquidity and confidence in future cash flows.

Key Drivers:
- Portfolio Diversification: A £723 million UK commercial property portfolio with a focus on industrial assets.
- Dividend Resilience: Consistent income generation supports its appeal to income-focused investors.
- Sustainability Goals: Commitment to net-zero carbon emissions by 2040 aligns with regulatory trends.

Investment Thesis: With a P/E ratio below the sector average and a turnaround in profitability, Picton Property Income is trading at a discount to its intrinsic value. The Simply Wall St Value Rating, though not explicitly mentioned, is implied by its improved financials and dividend policy.

3. NOTE AB (OM:NOTE): Manufacturing Resilience in Electronics

Industry: Electronics manufacturing and logistics
Market Cap: SEK 6.88 billion
P/E Ratio: 18.2x
Insider Buying: Johan Hagberg, a director, purchased shares worth SEK 600,416 in April 2025.

NOTE AB, a Swedish manufacturing solutions provider, has demonstrated resilience in a sector vulnerable to global supply chain disruptions. Despite a slight Q1 2025 revenue dip to SEK 1,003 million, the company's net income rose to SEK 65 million, supported by cost optimization and demand for its electronics logistics services.

Key Drivers:
- Regional Exposure: 70% of revenue comes from Western Europe, a region with stable demand for electronics.
- Margin Management: Gross profit margin variability (peaking at 13.54%) reflects pricing discipline.
- Growth Outlook: Earnings are projected to grow by 13% annually, bolstered by its focus on automation and digitalization.

Investment Thesis: NOTE AB's insider purchases and moderate P/E ratio (18.2x) suggest undervaluation relative to its earnings potential. While its reliance on external borrowing introduces risk, the company's strategic positioning in a high-growth industry justifies the leverage.

Strategic Implications for Investors

The three stocks highlighted above share a common thread: insider confidence and strong earnings growth potential amid market volatility. While small-cap investing inherently carries higher risk, these companies offer a compelling risk-reward profile due to their undervaluation metrics and management alignment with shareholders.

Actionable Steps:
1. Due Diligence: Use tools like Simply Wall St to analyze financial ratios and earnings forecasts.
2. Diversification: Allocate a portion of your portfolio to these stocks to hedge against broader market downturns.
3. Monitoring: Track insider transactions and quarterly earnings reports to validate ongoing momentum.

In a market where macroeconomic headwinds persist, European small-cap stocks like MJ Gleeson, Picton Property Income, and NOTE AB present a rare opportunity to invest in fundamentally strong companies at a discount. For investors with a medium-term horizon and a tolerance for volatility, these names warrant serious consideration.