In my latest post from February 1st, I proposed to purchase Live Oak Bancshares (LOB) based on insiders’ purchasing behavior. Today the stock opened at $15.11 – 4.35% increase in a week. LNDC, my recommendation from 3 weeks ago, opened today 12.15 – that’s 3.23% increase.
Strong signal – La Jolla Pharma
La Jolla Pharmaceutical (LJPC), from San Diego, CA, is a small cap biopharmaceutical company focused on the discovery, development, and commercialization of innovative therapies intended to significantly improve outcomes in patients suffering from life-threatening diseases. The stock started trading in 2012 and like many biotechs started very strong and then slowly declined as realities hit. However, this is not a new company and there is increasing income from a selling product (Giapreza) and two potential products quit advanced in the pipeline.
LJPC is well covered by five analysts, with an average price target of $18 (more than 3 times current price). Even the lowest estimate is higher than the current stock price. Two bloggers cover it as well and are both outright bullish. The market seems to be lagging behind, and insiders are jumping in.
As the stock price been getting to mid-$5’s, no less than five different insiders dipped in. Some of the transactions are low value, and it is a speculative stock, but I believe that the risk-reward here is sold. There is one sell in January, but it looks like a deal between 10%+ owners. I’ll take a small risk here, and purchase the stock on for $5.73.
Potential signal – Unifi
Usually, the more speculative recommendation is placed here, but today the order is reversed and a more conservative company is suggested – Unifi (UFI) is a textile manufacturing company from Greensboro, NC. The company has been around for a while and the stock price has been trading in the $20-$40 range for the last 6 years. However, currently the stock is very close to the lower end of the range, and insiders seem to be buying in enthusiastically - since November 2018 six individual insiders had made a significant investment in the company’s stock. I don’t expect anything to happen fast here, but in 6 months there should be a significant movement towards $40 (currently $22).
When purchasing a stock based on insider activity I normally hold it for up to 6 months or 30% increase, whichever comes first. During that time the potential should unfold, and if not, it probably wouldn’t, at least in this round (unless there is additional significant insider activity). I’m purchasing LJPC at $5.73 and UFI at $21.78 and hope to see a nice return in the coming months. Until next week!