When insiders sell shares there can be all kinds of reasons for this. However, there is only one reason why insiders buy shares. Then those shares must be undervalued and have potential. That should make investors alert, says Chris Markoch InvestorPlace.
Such insider buying can point investors to stocks that might otherwise remain a bit out of sight. Insider buying is just one factor that investors should consider when purchasing stocks. If more factors are positive, this can give confidence. Markoch shares with us 7 shares that he has on his ‘watchlist’.
Bristol-Myers Squibb
Bristol-Myers Squibb CEO Christopher Boerner has struck twice in the past 90 days. The reason was probably the announcement of the licensing agreement with SystImmune. That deal cost about $800 million, but could be worth up to $8.4 billion. That’s not a big expense for a company that generates annual profits of about $15 billion in 2022. In 2023, Bristol-Myers Squibb shares are down 26%. It is trading near its 52-week low.
Now is an attractive time to consider buying Bristol-Myers Squibb stock. It trades at just 6.8x forward earnings and its dividend yields 4.43%. The main reason for the pressure on the share price is that the company lost patent protection on its popular cancer drug Remlivid. But with biotechs, the pipeline is especially important to keep an eye on. And it is robust at Bristol-Myers Squibb, especially in oncology. The pharmaceutical company also has a number of blockbusters such as the blood thinner Eliquis.
Occidental Petroleum
Markoch only recently added Occidental Petroleum to its watch list. The share then traded below the price for which Warren Buffett had made two purchases earlier this year. And shortly afterwards, Buffett purchased Occidental shares with Berkshire Hathaway for approximately $300 million. This can partly be explained by the fact that Occidental is eligible for a number of green loans.
But Markoch also suspects that it has to do with the belief that oil prices are going up. Occidental recently announced a deal to acquire CrownRock for $12 billion, which will boost free cash flow. Markoch thinks Occidental is worth buying if the American economy makes a soft landing.
Darling Ingredients
Darling Ingredients is a leading producer of sustainable energy, particularly in the field of renewable diesel and biomethane. The name appears on a Newsweek and Statista list of America’s most responsible companies of 2024. The stock is down 19% in 2023 and is currently trading 65% below the average analyst price target. This is due to the weak profitability.
At the latest quarterly figures, revenues and profits were lower on an annual basis. In the last three months, five different insiders have made six purchases. Market sentiment has changed, with the stock up 18% in the past month. This coincides with a 5% decline in short interest over the past month.
Funko
Funko produces pop culture-inspired products ranging from media and entertainment content to fashion accessories under brand names such as Pop!, Funko and Popsies. Markoch follows the stock, partly because of the impact Funko has on collecting culture. Seven purchases have been made by a group of insiders in the past three months.
This took insider ownership above 10%, which is significant for a company with a market capitalization of just over $375 million. Institutional investors own 89% of Funko. It is a risky stock, but that applies to many small cap stocks. It may also take a few quarters before the profit picture improves.
Westrock Coffee
Westrock Coffee is another small cap stock on Markoch’s list. In the past three months, co-founder and chairman Joe Ford, among others, has purchased shares up to six times. This year the stock is down about 29%. But investors need to keep that in perspective. The company has only been listed on the stock exchange through a SPAC since October 2022. From this perspective, the stock is actually holding up well despite declining revenues due to falling coffee prices.
However, this is expected to change in the next two years. This may allow investors to focus more on the ways the company is appealing to younger coffee drinkers with initiatives such as the Farmer Direct Verified program, which allows the coffee bean to be tracked from farm to finished product.
STAAR Surgical
STAAR Surgical is a leading supplier of implantable lenses (ICL). The company has seen large numbers of insider buying in the past three months. It makes you curious about the reason. The company’s profits have declined year-over-year, but STAAR is still a profitable company that continues to generate significant revenue.
It expects to sell more lenses in the next three years than in the first 25 years of ICL sales combined. Currently, just over 1% of STAAR shares are owned by insiders and 96% of the shares are owned by institutional investors, so there are not many shares available to retail investors.
Neumora Therapeutics
With a market capitalization of $2.23 billion, Neumora Therapeutics is one of the mid-cap stocks. Neumora is a small biotech company in its pre-commercial phase. The goal is to develop new therapies for patients suffering from brain disorders. The lead drug candidate is Navacaprant (NMRA-140) for the treatment of depressive disorders and is in phase 3 of clinical trials.
Research results on this drug are expected in the second half of 2024. So it may take another year before it generates revenue. Neumora shares have only been publicly traded since September 2023. This may encourage investors to wait a while first.
Yet four insiders have made 17 stock purchases in the past three months. This is the stock with the most insider purchases in recent times. And if an investor believes in Neumora’s development potential, now could be the time to build a position.
Also read: 3 small stocks that could rise quickly
2023-12-27 07:30:00
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