4 Stocks Insiders Are Buying

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Includes: CHAP, HOFT, JPM, RCKT
by: The Insiders Forum
Summary

Today, we continue a recent weekly feature here on the Insiders Forum.

Each week, we highlight four or five notable stocks with significant and recent insider buying.

In this week's edition, we profiled a major bank with solid Q1 results with a large director purchase and a rallying E&P with huge insider buying from a beneficial owner.

For if the car drives in the wrong direction better fuel doesn't help." - Janusz Korwin-Mikke

Insider buying continues to ebb since hitting eight-year highs in December. So, which stocks are insiders still purchasing? Here are five interesting names that have seen recent insider buying.

JPMorgan (JPM) sees a big new insider buy. A director there purchased nearly $2.2 million of new shares via two transactions on April 16th and April 18th. On April 12th, the bank help officially kicks off first quarter earnings season reporting profits of $2.65 a share, 30 cents a share above the consensus.

Source: Earnings Slides

This was better than a 10% increase from the same period a year ago. Net interest margin revenue stayed relatively flat on a year-over-year period but credit card volume rose 10% and client investment assets surged 13% to over $310 billion. JPM also bought back $4.7 billion of its stock in the first quarter. It was a strong quarter all around from the bank.

A director at Hooker Furniture (HOFT) buys 8,000 shares or a little more than $200,000 in one transaction yesterday. It was the biggest purchase in the stock since 2010.

Like most home builders and housing-related stocks, HOFT saw a decline in the fourth quarter of last year. Unlike most of these equities, the shares have not managed to rally so far in 2019. The stock is not expensive at approximately nine times consensus earnings for FY2019. Revenues should rise in the mid-single digits and the equity yields just over two percent as well.

Despite an over $300 million market cap, this stock has a dearth of analyst coverage. Not a single analyst firm has chimed in on the shares so far in 2019 that I can find. However, it appears at least one director believes the shares are undervalued at current trading levels.

Next up is Rocket Pharmaceuticals (RCKT). This 'Tier4' name recently did a secondary offering that raised some $80 million in proceeds. A beneficial owner bought just over $9.6 million of that capital raise. It was only the second insider purchase in RCKT that I can find. The COO bought approximately $85,000 of shares in early December.

Rocket's shareholders have had somewhat of a roller coaster ride during the company's time as a public company. Inotek (ITEK) and Rocket merged in late 2017. The company has done several capital raises since then.

Source: Company Website

Rocket has multiple 'shots on goal' but seems years away from reaching commercialization stage.

Finally, we have Chaparral Energy (CHAP). We highlighted the insider buying in this small-cap E&P concern two weeks ago. Two things have happened with the recent Busted IPO Forum model portfolio addition since then. The stock has climbed some 20% and that same beneficial owner has continued to add to his growing stake in the firm.

In eight separate transactions (four on April 15th and four on April 18th), he has added nearly $8 million in new shares to his holdings. Chaparral Energy is an Oklahoma City-based independent oil and natural gas exploration and production company. The company's assets are comprised of ~260,000 net acres in the six-state Mid-Continent region with a primary focus on developing 131,000 net acres in the hydrocarbon-rich Oklahoma STACK play. Chaparral filed for Chapter 11 bankruptcy in 2016, emerging in 2017 after all pre-existing equity was cancelled and new common stock issued to previous holders of the company's senior notes. The new shares traded on the OTCQB market from May 2017 through May 2018, after which they moved to the NYSE. The company employs nearly 200 and with the recent run of its stock commands a market cap a little shy of $350 million.

Source: Company Presentation

At YE18, Chaparral had estimated proved reserves of 94.8 million barrels of oil equivalent (MMBoe) with a PV-10 value of ~$686 million and a reserve life of ~12.7 years. The reserves broke down as 34% oil; 39% natural gas; and 27% natural gas liquids.

2019 Outlook:

For FY19, management at Chaparral expects average daily production between 25,000 and 27,000 Boe, representing 22% to 32% Y/Y growth. Average daily production from the STACK is anticipated to be 21,000 to 23,000 Boe, marking a 45% to 59% increase Y/Y as Chaparral plans to invest $228-248 million into the STACK for D&C activities. By contrast, the acquisition budget is expected to be significantly lower in FY19: only ~$15 million versus the $111.4 million spent in FY18. Total LOE/Boe for 2019 is expected to be $5.25 with STACK LOE/Boe anticipated at $4.00, based on guidance midpoints.

Source: Company Presentation

Even with the recent rise in its shares, the stock is down some 60% from where it listed on NYSE in May of 2018. At least one person of the 'smart money' set believes the stock is significantly undervalued given his recent buying.

And those are four stocks showing some significant insider purchases recently.

The smaller the government, the less the need to manipulate politicians." - John Stossel

Bret Jensen is the Founder and author of articles on The Biotech Forum, The Busted IPO Forum, and The Insiders Forum.

Disclosure: I am/we are long CHAP,HOFT. 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.