I don't know where my ideas come from. I will admit, however, that one key ingredient is caffeine. I get a couple cups of coffee into me and weird things just start to happen.” ― Gary Larson
The market has done quite a bit better here in June compared with May, where the overall market fell just over six percent. Tensions with Iran and China still remain headwinds for equities. This has been counterbalanced nicely by increasing consensus the next move by the Federal Reserve will be an in interest rate cut, most likely at the September Fed meeting. Investors will be listening closely for clues on this during the two-day meeting of the central bank which begins today.
We are approximately a month away from the start of second quarter earnings season. So what are insiders buying now given the current uncertainty in the market? It appears there is some buying across the small technology sector. Here are three names that caught our eye.
Let's start with Turtle Beach (HEAR). This company is based just outside San Diego. Turtle Beach also develops various gaming headset solutions for various platforms, including video game and entertainment consoles, handheld consoles, personal computers, and mobile and tablet devices under the Turtle Beach brand. In addition, it provides directional audio with applications in digital signage and kiosks, consumer electronics, and hearing healthcare under the brand name of HyperSound.
The stock is seeing its first insider buying since November of 2017. Two separate directors, the company's CFO and its CEO together bought nearly $500,000 in new shares in a half dozen transactions from June 7th to June 13th.
Despite delivering a solid Q1 earnings report on May 8th, the shares trade near 52-week lows and off some 60% from highs last year. Q2 guidance was lower than the consensus but the company did reaffirm 2019 full year guidance of between $240-248 million in revenue and $0.90-1.00 in EPS. Gross margins did fall to 33% from 36.8% in Q1. Insiders seem to be signaling the shares look undervalued at current trading levels.
Next up is Presidio (PSDO) which sees its first insider buying of 2019 as a director and the CEO purchased nearly $200,000 in new shares on June 7th. Presidio is located right here in New York City. The company provides IT solutions to the middle market. These include digital infrastructure solutions that enable clients to deploy IT infrastructure, as well as focuses on networking, collaboration, enterprise mobility, Internet of Things, and data analytics.
Like Turtle Beach, the shares sell near 52-week lows and have been range-bound over the past year. The company posted mixed Q1 results on May 8th on year-over-year revenue growth of eight percent. The company came public in the first half of 2017 and currently sports a market cap of approximately $1.1 billion.
Despite an over $1 billion market cap, the company gets sparse coverage on the Street. Over the past six months or so, I can find only two analyst ratings on the stock. SunTrust Robinson initiated the shares as a new Buy with a $17 price target on December 4th. Citigroup maintained its Buy rating and lifted its price target a buck a share to $19 on February 7th. The shares seemed reasonably valued at nine times forward earnings with just over a one percent dividend yield.
Finally, we have Marchex (MCHX) which is a Seattle-based call analytics company. The firm produces an analytics platform for enterprises that depend on inbound phone calls to drive sales, appointments, and reservations. In addition, the company offers a platform that enable businesses to send and receive text/SMS messages with customers as well as other solutions that improve analytics and monitoring.
A beneficial owner added just over $250,000 in shares via two transactions on June 11th. Like the other two names on this piece, this is the first insider buying in this equity in 2019. Unlike the other two companies profiled, the shares of Marchex have done well over the past year, although the stock has pulled back in recent trading sessions.
The company delivered a roughly inline first quarter when it reported results on May 2nd. Revenues rose over 20% on a year-over-year basis. After no analyst activity in 2019, a couple of analyst firms 'chimed in' on Marchex in May right after first quarter results. On the third of the month, Roth Capital maintained its Buy rating but bumped up its price target on MCHX by a buck a share to $8. The same day, Northland Securities reiterated its own Buy rating and $7 price target on Marchex.
And those are three small technology stocks showing recent and significant insider buying for consideration and further due diligence.
I need COFFEE to help me change the things I can... and WINE to help me accept the things I can't!” ― Tanya Masse
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Disclosure: I am/we are long HEAR. 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.