Self-respect--the secure feeling that no one, as yet, is suspicious.” ― H.L. Mencken
We start a new weekly feature today here at The Insiders Forum. Every week we will be providing very brief overviews of five interesting stocks insiders are currently buying. I have always found insider buying one of best indicators that a stock may be undervalued.
In fact, insider buying was a great 'tell' that the market had gotten oversold during the fourth quarter sell-off. Insider buying hit a eight-year high in December. It is also a key reason the model portfolio at The Insiders Forum has easily beat the performance of Russell 2000 since the launch of its model portfolio in the summer of 2016. Recently, insider buying has turned tepid. This is understandable given the huge run in the market during the first two months of 2019, but this also might be a good sign to be more cautious in the months ahead.
Here are five stocks picking up recent insider buying of note. After no insider activity at all in five months, things are picking up at the original 'fracker' Continental Resources (CLR) over the past week. The CEO Harold Hamm has added nearly $40 million in four separate transactions on February 21st and February 22nd. This added more than 30% to his already large stake in the company.
The stock has held up well in the back half of February despite reporting lower than expected Q4 results on February 19th. A positive article on SeekingAlpha on Continental was published on February 22nd as well. That same day Stephens reissued their buy rating and $74 price target on the stock.
B. Riley Financial (RILY) has also seen insider buying from its CEO in recent weeks as he added just over $330,000 to his stake in the company via two transactions on February 21st and 22nd. Another director added approximately $135,000 to his holdings on those days as well. The CEO also bought just under $700,000 in new shares in RILY in early December.
Next up is Xeris (XERS), which is has gotten deep into 'Busted IPO' territory since debuting on the public markets in June of last year.
A beneficial owner took nearly 60% of a small and reduced capital raise the company did in mid-February. Three other officers also made small purchases totaling just under $100,000 in aggregate at the same time. Interestingly, a different beneficial owner bought nearly $2 million in new shares through myriad transactions from January 23rd through February 11th at substantially higher prices (approximately the $15 level)
The only analyst commentary on Xeris so far in 2019 came right after its secondary offering in February when Mizuho Securities reiterated their Buy rating and $27 price target on XER with the following commentary.
We believe this financing is positive for a number of reasons: 1) Provides financing through 2022, by which time we believe Xeris can be cash break-even; 2) Allows management to focus on the Gvoke HypoPen launch, 3) Avoids the potential pitfall of “short the launch” phenomenon, 4) Creates opportunities for higher long-term growth by optimal upfront investment in the company. We maintain our Buy rating and $27 PT assuming Gvoke Hypopen NDA approval in ~50% market share 6-7 years post launch.
We will publishing a 'deep dive' on Xeris exclusively to Busted IPO Forum members in the near future.
Insider buying activity came to life recently for struggling toy maker Mattel (MAT). Four officers bought nearly $2 million worth of shares from February 19th through February 22nd led by a $1 million purchase by the CEO on February 21st.
It has been a roller coaster month for shareholders. The stock surged early in February on better-than-expected Q4 results when Mattel posted an unexpected quarterly profit. The shares gave back a good portion of those gains on February 15th after the company offered tepid guidance during its Analyst Day. An SA contributor 'chimed in' on the company's confab with analysts as well.
Mattel has branched out recently. The company launched a film business late last summer. The new division will be focused on developing and producing motion pictures based on Mattel's globally-recognized franchises like Barbie. The company has also had to deal with the fallout from the Toys R Us's bankruptcy late last year.
Finally, we have a small energy services firm seeing its first insider buying since late in 2017. A director bought 50,000 shares and the CEO bought 20,000 shares in Key Energy Services (KEG) on February 21st. As can be seen from the chart above, it has been a wild ride for shareholders in this onshore rig-based well servicing contractor. The stock had a major move up in trading on Monday.
It seems like prescient timing for those insider buys, at least in the short term. The shares rose some 20% after posting Q4 results on February 26th. A good overview of the company's revenue mix and geographic exposure is presented below.
And those are five interesting stocks seeing significant insider buying in recent weeks.
Every election is a sort of advance auction sale of stolen goods.” ― H.L. Mencken
Author's note: I present an update my best small and mid-cap stock ideas that insiders are buying only to subscribers of my exclusive marketplace, The Insiders Forum. Try a free 2-week trial today by clicking on our logo below!
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in XERS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.