Nothing is so permanent as a temporary government program.” ― Milton Friedman
The S&P 500 has risen some 15% so far in 2019, one of its fastest starts to a year in decades. The Dow is near all-time highs despite being weighed down by the recent troubles at Boeing (BA).
Insider buying has ebbed significantly since hitting eight-year highs in December. So which stocks are insiders still purchasing. Here are five interesting names insiders still seem to like despite the big rally in the market so far this year.
Let's start with Chaparral Energy (CHAP). This 'Busted IPO' from the energy sector is starting to pick up some considerable insider buying. A beneficial owner scarfed up over $4.5 million in new shares on April 2nd. The CEO also bought $40,000 in stock on March 29th. It should be noted that the same beneficial owner added over $4.5 million to his stake on March 20th.
The stock has not rewarded shareholders since going public in May of 2017. The shares do look like they are trying to form a bottom in recent months. Three analyst firms have reiterated or assigned Buy ratings to the name over the past nine months - Johnson Rice ($31 price target), Stifel Nicolaus ($23 price target) and Imperial Capital ($10 price target).
The company's acreage is located in the Woodford shale region of Oklahoma. The company has an approximate market cap of $250 million, is profitable and selling at approximately one-time revenues.
Chaparral is not the only E&P concern seeing considerable insider activity. Gran Tierra Energy has a beneficial owner buy more than $1.2 million in new shares on April 1st and 2nd. The same beneficial owner added more than $7 million to their core stake throughout March in numerous transactions.
The shares have been range-bound between the $2 and $4 levels for over four years now and currently go for right around $2.50 apiece. Gran Tierra is focused on energy production in South America and recently entered Ecuador. The stock gets sparse coverage on Wall Street despite a market capitalization just south of $1 billion.
Small oncology play AVEO Pharmaceuticals (AVEO) which has had a roller-coaster ride over the past couple of years saw beneficial owners buy most of a recent secondary offering. It appears several beneficial owners bought almost all of a capital raise on April 8th that raised some $25 million in proceeds.
The stock was crushed in late January after news broke that the company would not file a U.S. marketing application seeking approval for its compound FOTIVDA for the treatment of adult patients with advanced renal cell carcinoma as planned. AVEO will now wait until it has more mature overall survival (OS) data from its Phase 3 TIVO-3 study.
The stock got down to 50 cents a share in late March before buyout speculation perked up the shares. In early April, the stock rose further on early stage data evaluating the combination of FOTIVDA and cytarabine in patients with relapsed/refractory acute myeloid leukemia. Evidently, insiders still believe the company has upside and remain patient investors in this very high beta name.
It has not been a good few months for shareholders in Walgreens Boots Alliance (WBA). The company has come under increasing scrutiny for tobacco sales, especially for youth sales by the FDA. Walgreens also could be impacted by various drug pricing legislation currently floating around.
More importantly, the company missed both top and bottom line expectations when it reported Q4 results early in April. Amazon (AMZN) also looks like it will be targeting the pharmacy space. At least one insider believes the shares have gotten oversold. The COO of the company bought just under $1 million in new shares on April 3rd. It was the first insider purchase in the stock (after myriad sells) since mid July of 2018 when the CEO bought a much bigger chunk of equity at just under $64.00 a share.
The stock advanced quickly to just over $85.00 a share after that insider buy before the company encountered its recent troubles. The equity is not expensive at roughly nine times earnings with a more than three percent dividend yield to boot.
Finally, we see the first insider buying in Merrimack Pharmaceuticals (MACK) in more than three years as two beneficial owners buy approximately $700,000 in new shares in five transactions on April 5th and April 8th.
It has been a wild ride for Merrimack's shareholders since the company came public in 2012. This Boston-based firm is focused on biomarker-defined cancers. After selling off its drug 'Onivyde' for just over $1 billion ($575 million upfront and the rest in potential milestones) to Ipsen in early 2017, Merrimack again has a very early stage pipeline. The company discontinued development for its lead candidate MM-310 earlier this month. Evidently, insiders still believe there is value in Merrimack's pipeline given their recent purchases.
And those are five names seeing significant insider buying at the moment.
Underlying most arguments against the free market is a lack of belief in freedom itself.” ― Milton Friedman
Author's note: I present an update to 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 am/we are long AVEO,CHAP. 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.