3 Stocks Flashing Signs of Strong Insider Buying
For an individual investor to beat the market, you need an edge. Investing strategies come in different forms and you can rely on several factors to achieve the end goal of strong returns. Be it following analyst ratings, upcoming catalysts or recognizing the latest market moving trends. There is another option: following the signal from those in the know – the corporate insiders. These are the company officers whose positions give them both access to frequently privileged information on business plans and finances and the experience necessary to translate that into smart stock trades. And better yet – they are not wholly free actors. Being responsible to shareholders and Boards of Directors for company profits, these insiders cannot use their inside knowledge for selfish purposes. Which means that following their stock trades, especially of their own companies, can be a viable investment strategy. Fortunately, federal regulations require that the insiders make their inside trades public – to keep the playing field level. To make that search easier, the TipRanks Insiders’ Hot Stocks tool gets the footwork started – identifying stocks that have seen informative moves by insiders, highlighting several common strategies used by the insiders, and collecting the data all in one place. We’ve picked three stocks with recent informative buys to show how the data works for you. Calix, Inc. (CALX) The first stock we’re looking at is Calix, a cloud computing tech company. Calix follows a subscription model, offering cloud software, systems, platforms, services, and solutions to the communications industry. Calix’s products give the customers real-time data and data insights into their end-users, allowing them to more efficiently monetize their business and customer interactions. Calix, like many high-tech software platform companies, offers a system that can streamline operations – a vital advantage in today’s expanding remote work climate. The company’s revenues reflect the growth-oriented environment: the top line showed year-over-year growth in each quarter of 2020, with the most recent, Q4, coming in at $170 million being the best of the past two years. EPS, at 37 cents, was up 15% from Q3, and was positive for the second quarter in a row – a feat the company had been unable to achieve over the past two years. With a background like that, it’s no wonder that this stock is seeing insider buying. The most recent purchase is from Board member Donald Listwin, who bought up 20,000 shares, shelling out almost $715,000. 5-star analyst Paul Silverstein, of Cowen, notes that Calix has adopted an age-old strategy for beating the forecasts: “4Q20 fuels our view that near- and long-term earnings power and cash flow continue to be significantly greater than what Street has modeled… we respectfully note that CALX has established a clear pattern of appropriately and admirably taking a highly conservative stance as to risk assessment and, concomitantly, under-promising and over-delivering.” Silverstein clearly likes Calix’s approach, and he rates the stock an Outperform (i.e. Buy). On top of this, the analyst gives the stock a $45 price target, which implies a one-year upside of 23%. (To watch Silverstein’s track record, click here) What does the rest of the Street think? Looking at the consensus breakdown, opinions from other analysts are more spread out. 3 Buys and 2 Holds add up to a Moderate Buy consensus. In addition, the $37.40 average price target indicates a modest upside from current levels. (See CALX stock analysis on TipRanks) DXC Technology Company (DXC) Founded in 2017, in part as a spin-off from Hewlett Packard Enterprises, DXC is a leader in the business-to-business (B2B) IT field. The company’s products allow global companies to run their critical systems and ops efficiently, with security and scalability at a variety of levels. DXC’s enterprise tech enhances performance and competitiveness, and therefore the customer experience. The company has been seeing a dropoff in revenues over the past two years. It saw $19.5 billion in revenues for calendar year 2020, but is on track come in at ~$18 billion for fiscal 2021. The most recent quarter reported, fiscal 3Q21, showed $4.29 billion at the top line, falling 14.6% year over year. However, earnings, at $4.29, were far stronger than the 80-cent and 96-cent losses reported in the previous two quarters. Despite the falling revenues, the company has maintained its dividend, paying out 21 cents per common share over the past year, for a current yield of 3.2%. Looking at the recent insider trades, we see that Board member Raul Fernandez made two purchases this month, buying up 11,443. Fernandez paid nearly $300,00 for the new shares. In a comprehensive review of DXC, RBC analyst Daniel Perlin, rated 5-stars at TipRanks, writes: “We believe that FQ3/21’s results provided proof points that DXC’s transformation is progressing. In terms of customer focus, we note that revenue in the quarter increased 3.1% q/q and 1.7%… the second quarter in a row of sequential improvement…” Perlin went on to list several reasons for his bullish thesis: “1) management succeeding on its strategic plan and achieving its FY22 targets; 2) DXC evolving into an at-scale digital / new technology player, which should help offset declines in traditional solutions; and 3) valuation is attractive relative to peers, especially given potential upside to synergy targets.” Perlin uses these comments to support an Outperform (i.e. Buy) rating on DXC, and a $38 price target that indicates room for a robust 46% upside in the next 12 months. (To watch Perlin’s track record, click here) The Wall Street analysts are taking a range of views on this stock, as shown by the 10 recent reviews – which include 4 Buys and 6 Holds. Added up, it comes out to a Moderate Buy analyst consensus rating. The average price target, at $31, implies a 19% one-year upside from the current trading price of $26.06. (See DXC stock analysis on TipRanks) Northern Oil and Gas (NOG) Last but not least is Northern Oil and Gas, a highly localized hydrocarbon explorer, with assets in the states of Montana and North Dakota, specifically, the Williston Basin. NOG owns a large acreage footprint in the region, holding title to the lands on which developers will drill and complete oil and gas wells. This year, NOG has made two moves to increase its operating capital. The second move was announced on February 8 – an offering of senior notes at 8.125%, due in 2028. Proceeds are to be used to repay various outstanding debts and interest obligations, and then to help fund acquisition of new natural gas assets. The new land acquisitions targeted are in the Appalachian region, and will mark a true expansion for Northern Oil and Gas. The first capital move, however, is more interesting for this current article. On February 4, the company announced that it was putting 12.5 million shares of common stock on the market, at a price of $9.75 per share. Capital raised will be used first to fund the Appalachian Basin land buy, and then to repay debt and fund general operations – these are standard conditions on this type of capital drive. Company Board member Stuart Lasher bought 25,000 shares of NOG just a few days after the public stock offering was announced. The recent bloc of shares was picked up for $243,750. RBC’s Scott Hanold is clearly bullish on this company’s expansion to a new region, writing, “NOG’s Appalachian acquisition was strategic by accelerating leverage reduction, balance sheet clean-up, and diversifying its asset and commodity footprints. The move into the Marcellus gas play underpins management’s aptitude to focus on generating the best economic returns…” Hanold rates NOG an Outperform (i.e. Buy), and his $15 price target suggests the stock has room for 37% growth this year. (To watch Hanold’s track record, click here) With 4 recent reviews, all Buys, the Strong Buy analyst consensus rating here is unanimous. Northern’s shares are priced at $10.99 and they have an average price target of $14.75, indicating that the stock has a 34% one-year upside potential. (See NOG stock analysis on TipRanks) To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.