Institutional investors will tell you that one of the more accurate predictors of a stock that is ready to rise is large share purchases by company executives and other insiders. Unlike individuals who engage in insider trading, which is done without public disclosure and/or knowledge, insider buyers are required to file any share purchases (amount and share price) of their company stock with the SEC. This makes the trade part of the public information that is available to every investor. Insider buying has a different significance than insider selling. Like all of us, company executives have lives and expenses. This means there can be many reasons for a company insider to sell a stock.
However, it’s a different matter when an insider buys shares of their company’s stock. The only reason for an insider to buy their company’s stock is simple – they expect the stock to increase in value. Insider buying tends to occur when the company’s stock has gone through a sharp correction. As you consider positions to enter going into the second quarter earnings season, take time to review this presentation for seven stocks that are showing heavy signs of insider buying.
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- Valero Energy Corporation
- Schlumberger Limited
- EQT
- Ligand Pharmaceuticals
- Calix
- J.B. Hunt Transportation Services
- Advance Auto Parts
#1 - Valero Energy Corporation (NYSE:VLO)
Valero Energy Corporation (NYSE: VLO) - Leading off our presentation is one of the big boys in the energy sector. Valero is the largest global independent oil refiner with refineries throughout the United States, Canada, and the United Kingdom. Valero has outstanding fundamentals including, like a lot of energy stocks, a tempting dividend yield that is currently around 4.3%. With all that said, the stock is in the cyclical energy sector and right now the stock is in a trough. It has declined about 30% from its peak of about $121 in August of 2018. It has been trading in a tight range since the beginning of 2019 and has declined over 15% since a first-quarter earnings report that beat estimates but saw a year-over-year decline in gross operating revenue. The stock currently sits at just under $85 per share. However, since the fourth quarter of last year, directors of the company have combined to buy 25,000 shares that are worth $1.87 million. That level of buying is consistent with the company’s history of returning value to shareholders through share repurchases. For long-term investors who can stomach the volatility that is inherent in oil and gas stocks, Valero is a solid choice.
About Valero Energy
Valero Energy Corporation manufactures, markets, and sells petroleum-based and low-carbon liquid transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, Latin America, Mexico, Peru, and internationally. It operates through three segments: Refining, Renewable Diesel, and Ethanol.
Read More - Current Price
- $118.59
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 3 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $155.07 (30.8% Upside)
#2 - Schlumberger Limited (NYSE:SLB)
Schlumberger Limited (NYSE: SLB) - Schlumberger is another oil and gas stock that is tough to overlook. Despite having solid fundamentals, the stock declined 30% in the fourth quarter of 2018. So far in 2019, the stock remains near its 52-week low. But is that trend about to change? Over the last 15 months, a group of insiders has purchased over 50,000 shares valued at over $3 million. It also appears that a slew of M&A activity in 2015 and 2016 is set to pay off as the industry is starting to see increased efficiencies and technological advances that are making the sector more attractive. Investor sentiment seems to be following analysts’ recommendations. SLB is reviewed by 34 analysts and currently has a consensus rating of overweight with several analysts upgrading the stock from hold to buy. Add to that the fact that SLB is offering a record high dividend of over 5 percent, it’s easy to see why investors will begin to take a closer look at this stock.
About Schlumberger
Schlumberger Limited engages in the provision of technology for the energy industry worldwide. The company operates through four divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems. The company provides field development and hydrocarbon production, carbon management, and integration of adjacent energy systems; reservoir interpretation and data processing services for exploration data; and well construction and production improvement services and products.
Read More - Current Price
- $36.83
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 17 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $58.85 (59.8% Upside)
#3 - EQT (NYSE:EQT)
EQT (NYSE: EQT) - The Pittsburgh-based natural gas company produces and transmits natural gas throughout the Appalachian area. Its stock has plummeted by 50% in less than a year. However, if analysts’ recommendations are to be believed, the company’s fortunes might be changing. Of the 18 firms that cover the company, it received a consensus buy rating and none of the analysts had a rating lower than a hold. Their consensus price target for the stock is $25 per share which would be a significant rise from its stock price (as of this writing) of $14.88 per share. In the last few months, CEO Robert McNally has made two stock purchases totaling over $500,000 dollars. This is in addition to other high-level executives who have made large purchases. Donald Jenkins, Executive Vice President purchased over $110,000 worth of the company’s stock and the senior VP of Human Resources, Dave Smith purchased over $300,000 of the company’s stock.
About EQT
EQT Corporation operates as a natural gas production company in the United States. The company sells natural gas and natural gas liquids to marketers, utilities, and industrial customers through pipelines located in the Appalachian Basin. It also offers marketing services and contractual pipeline capacity management services.
Read More - Current Price
- $42.99
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $46.61 (8.4% Upside)
#4 - Ligand Pharmaceuticals (NASDAQ:LGND)
Ligand Pharmaceuticals (NASDAQ: LGND) - Ligand develops or acquires technologies that assist pharmaceutical companies in their efforts to discover and create new medicines. Biotech companies like Ligand are notoriously among the most volatile stocks in the industry. Still, when a company with a market cap of over $2 billion sees their stock drop from a high of nearly $280 per share to close under $110, investors take notice – as do analysts. All five analysts that cover the company gave it a buy rating with a consensus price target of $202 – which would be a nearly 80% increase from the current price that is sitting just below $112. In May, CEO John Higgins purchased over $280,000 of the company’s stock when the stock was selling for $113.50 per share. Over the last 90 days, a total of 4,500 shares of the company’s stock have been purchased by company insiders. Adding fuel to the notion that the stock is about to rise, call options for the company’s stock on June 26 were over 1,000 percent higher than normal.
About Ligand Pharmaceuticals
Ligand Pharmaceuticals Incorporated, a biopharmaceutical company, engages in the development and licensing of biopharmaceutical assets worldwide. Its commercial programs include Kyprolis and Evomela, which are used to treat multiple myeloma; Rylaze, a recombinant erwinia asparaginase for the treatment of acute lymphoblastic leukemia or lymphoblastic lymphoma in adult and pediatric patients; Filspari, a dual endothelin and angiotensin II receptor antagonist in development for rare kidney diseases and non-immunosuppressive treatment indicated for immunoglobulin A nephropathy; Teriparatide injection product for osteoporosis; Vaxneuvance for the prevention of invasive disease caused by streptococcus pneumoniae serotypes; and Pneumosil, a pneumococcal conjugate vaccine to help fight against pneumococcal pneumonia among children.
Read More - Current Price
- $114.64
- Consensus Rating
- Buy
- Ratings Breakdown
- 6 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $147.00 (28.2% Upside)
#5 - Calix (NYSE:CALX)
Calix (NYSE: CALX) For investors who are intrigued by small-cap stocks, Calix presents an intriguing opportunity. Calix is a $330 million player in the highly competitive telecom sector, providing broadband communications systems and software as well as developing and selling hardware and software. The stock has tumbled over 60% since February and is currently trading below $7 per share. Part of the reason for the drop may be explained in two words: inconsistent earnings. The stock beat the consensus estimates in the third quarter of 2018, only to fall below estimates in the fourth quarter. The performance of this stock is reflected by stock analysts. The consensus rating of six analysts is a hold. However, whereas sometimes a hold rating can be seen as a sell signal, this rating was accompanied by a price target of $10.75, which would be significantly higher than its current price. One of the most significant insider buys was from one of the company’s directors, Daniel Plants, who invested nearly $160,000 in the company’s stock.
About Calix
Calix, Inc, together with its subsidiaries, engages in the provision of cloud and software platforms, and systems and services in the United States, rest of Americas, Europe, the Middle East, Africa, and the Asia Pacific. Its cloud and software platforms, and systems and services enable broadband service providers (BSPs) to provide a range of services.
Read More - Current Price
- $35.36
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $42.50 (20.2% Upside)
#6 - J.B. Hunt Transportation Services (NASDAQ:JBHT)
J.B. Hunt Transportation Services (NASDAQ: JBHT) - One of the largest trucking firms in the United States, J.B. Hunt has seen its stock ride a roller coaster in 2019. The stock started the year on a tear climbing over 20% in the first month and a half. Since then it has given up all those gains and then some. Off of a miss in their first-quarter earnings report, analysts have given the stock a consensus “hold” rating with a 12-month price target of $113.81. However, included within these recommendations are analysts (including Deutsche Bank and Zacks Investment Research) who have downgraded the stock. When it comes to insider buying, president and CEO John Roberts purchased nearly $200,000 of the company stock as recently as May 28th. Earlier in the month, a director of the company made a $700,000 investment in the company. At issue seems to be a tug of war between a camp that believes the trucking industry is in danger of a recession due to the ongoing trade dispute with China and other factions that see JBHT’s strength in intermodal shipping. The Dow Transports Index, of which JBHT is a part, is down by more than the Dow Industrials YTD.
About J.B. Hunt Transport Services
J.B. Hunt Transport Services, Inc provides surface transportation, delivery, and logistic services in the United States. It operates through five segments: Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS), Final Mile Services (FMS), and Truckload (JBT). The JBI segment offers intermodal freight solutions.
Read More - Current Price
- $170.23
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $190.11 (11.7% Upside)
#7 - Advance Auto Parts (NYSE:AAP)
Advance Auto Parts (NYSE: AAP) After a disappointing 2018 that saw same-store sales decline by 2.3%, Advance Auto Parts is on the rebound. The company is projecting a growth in same-store sales of between 1% and 2.5% with strong gross margins that when combined with rising sales is a sign of strength. Analysts seem to agree. Eleven analysts have a consensus rating of strong buy with a consensus price target of $190.71. This would represent an almost 25% increase from the stock’s current level which is just under $150 per share. The stock is down over 15% since April 2019 and remains in a tight range despite issuing an earnings report that beat both top line and bottom line estimates. This may be a case of the stock just needing some time to catch up as the ex-dividend date for its July 5, 2019 dividend has just passed. In 2018, two company insiders purchased nearly 10,000 shares.
About Advance Auto Parts
Advance Auto Parts, Inc provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts.
Read More - Current Price
- $43.52
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 14 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $48.40 (11.2% Upside)
The seven stocks in this presentation are just a sample of the stocks that show evidence of insider buying every day. Insider buying information is available to the investing public. As mentioned in the introduction, company insiders of U.S. companies are required to file their insider buying activity with the SEC in what is called a Form 4 filing. These filings can be found on the SEC’s EDGAR database. However, if you would prefer not to comb through an entire list of companies that are engaging in insider buying, there are many public databases, including MarketBeat All Access, that provide daily listings of the stock’s that are showing insider buying activity. One advantage of sites such as these is that investors can sort companies in many ways including by market cap, sector, or by ranking buying activity from the companies that are most active to those that are least active. Canadian companies are also required to make public disclosure of insider buying on the country’s System for Electronic Disclosure by Insiders (SEDI). Investors can look at sites such as MarketBeat.com for a list of the companies that are listed on the SEDI database.
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