Tracking insiders’ stock purchases can make a viable investment strategy. Corporate insiders – the company officers and board members – are naturally positioned to be in the know, to know how company policies and performance will impact stock prices. They can use that knowledge to inform their own stock purchases – but not unfairly. By law, they must disclose publicly their own stock holdings, and the general public can learn from those purchases and sales.
Insider moves can informative or uninformative. The latter are simple shifts in portfolio holdings, usually not of great magnitude, done to tweak an ownership percentage or adhere to a tax regulation. The informative moves, however, are different. These are the big-number buys and sells – and when an insider, or several insiders, start making informative share moves, market watchers should take note. These are signs that something big may be in store.
TipRanks gathers and collates markets data, on stock performance and on Wall Street’s analysts, and among that data are insider signals. The Insiders’ Hot Stocks page gives a review of recent moves by the market’s top insiders, showing just what they are buying and selling to inform your portfolio moves. We’ve used that filter to pull up three stocks that bear watching. From an investor’s perspective, each of these stocks has an important feature in common: high dividends, making them desirable as sources of income. Let’s dive in, and check out the details.
Huntsman Corporation (HUN)
First on today’s list is a major player in the chemical industry. Huntsman manufactures epoxy, acrylic, and polyurethane chemicals, along with a range of surfactants, amines, and dyes. The company markets to an industrial customer base, and customers include BMW, Chevron, and GE. Huntsman has a global reach, with 70 manufacturing and R&D facilities, and operations in over 30 countries worldwide. 2019 revenues reached $6.797 billion.
Company insiders have purchased more than $415,000 worth of HUN shares in recent days, giving the stock a strongly positive insider signal. The largest purchase was by Peter Huntsman, President and CEO; he bought $232,700 worth of shares in the last week of February, making his total holding more than 7.76 million shares.
The 2019 revenue number represents a drop year-over-year. Q4 showed a top line of $1.66 billion, compared to $2.24 billion the year before. Despite the falloff in revenues, earnings beat the forecast in the final quarter by 3.5%, coming in at 29 cents per share.
Huntsman management announced the Q1 2020 dividend along with the Q4 earnings, and held the payment at 16.25 cents per share. The company has a 13-year history of maintaining – and slowly growing – dividend payments, and the Q1 payment will be the ninth in a row at the current rate. The annualized payment, 65 cents per share, makes for a 3.5% yield, well above the market average and a solid return for investors to bank.
James Sheehan, a 4-star analyst with SunTrust Robinson, is impressed by HUN’s balance sheet and dividend payment, writing, “We expect more M&A in 2020 as HUN utilizes its greater financial flexibility to expand in higher quality polyurethanes systems and Advanced Materials. Return of cash to shareholders remains part of a balanced approach to cash flow deployment. HUN commented that future M&A is likely to be funded by existing cash or further divestitures, reinforcing our view that the company has no plans to lever up.”
Sheehan reiterated his Buy rating on the stock, along with his $29 price target. His target implies an upside potential of 55%. (To watch Sheehan’s track record, click here)
Overall, HUN’s Moderate Buy consensus rating is based on 4 Buys and 1 Sell set in recent weeks. The stock is selling for an affordable $18.69, and the $23.80 average price target suggests that it has room for 27% upside growth. (See Huntsman stock analysis at TipRanks)
Ryder System, Inc. (R)
Next on our list is Ryder, best known for its rental trucks. That’s only part of the business, however – the company’s largest segment is fleet management services, and it also provides supply chain services and logistics management in the transport sector. The company has operations across the lower 48 states and Canada.
In recent days, company insiders have been making large purchases of Ryder stock – informative buys, as noted above. The total of such purchases has reached $1.22 million worth of shares, with the largest by Robert Sanchez, company CEO and Chairman, who bought up over $515,000 worth of stock last month.
Ryder shares lost value during 2019, and the company reported mixed results in the fourth quarter. Revenues were up, and at $2.27 billion for the quarter were a company record, but EPS showed a net loss of $1.02. The loss came from a $118 million depreciation expense charged during the year, as well as the impact of labor strikes. Full-year revenue for 2019 gained 6.1% year-over-year to reach $8.9 billion.
Looking forward, Ryder guides toward moderated losses in Q1, and a 2020 free cash flow of $350 million. A positive cash position going forward will be a boon for investors, as it will ensure sustainability for the company’s dividend. Ryder currently pays out 56 cents per share quarterly, or $2.24 annualized, and has a 20-year history of reliable payments. The company has raised the dividend four times in the past three years. The yield is the most impressive point about the dividend. At 6.2%, that yield beats the S&P average by a factor of three – and it is far superior to Treasure bond rates. Combined with the company’s long-term commitment to maintaining the payment, the dividend is an attractive feature of the stock.
Two of Wall Street’s analysts have recently given Ryder positive reviews. Wolfe Research’s Scott Group sees Ryder as a net positive in the long term, and wrote of the stock, “…assuming about half of this year’s rental headwinds reverse next year, continued growth in contractual earnings, and a lower tax rate, offset by continued strategic investments, we estimate a combined $2.80 of y/y tailwinds in C21.”
Group puts a Buy rating on R, and his price target of $52 implies an upside of 41%. (To watch Group’s track record, click here)
Writing from SunTrust Robinson, Stephanie Benjamin also sees long-term potential in R shares. The analyst says in her recent research note, “…we believe the investments announced… are positioning the company for less volatility with an improved return profile and positive FCF going forward. More importantly, we expect earnings acceleration in 2021 as depreciation expense normalizes, as well as it laps the pruning of lower-return accounts and its investments in maintenance facilities and used truck centers.”
In line with her outlook, Benjamin gives R a $53 price target and a Buy rating. Her target suggests an upside of 44%. (To watch Benjamin’s track record, click here)
Ryder’s Moderate Buy consensus rating is based on 2 Buys set in recent days, along with 1 Hold and 1 Sell. The stock is selling for $35.98, and the $53 average price target indicates room for 44% upside growth. (See Ryder’s stock analysis at TipRanks)
BJ’s Restaurants, Inc. (BJRI)
California-based BJ’s operates 204 restaurants across 27 states, covering a wide geographical swath of the US. The company brews its own beer at 6 different breweries, and offers a rotating selection of seasonal brews. BJ’s saw revenue grow 4% in 2019, to reach $1.2 billion. In the fourth quarter of the year, net income rose to 75 cents per share, a gain of 53% year-over-year. Total quarterly income was $14.5 million based on $291.1 million revenues. The quarterly revenue growth, at 3.8% yoy, was in-line with the annual pace.
The solid quarter supported a dividend of 13 cents per share. BJRI has paid out its dividend regularly for the past 10 quarters. The current payment annualizes to 52 cents per share and gives a modest yield of 1.6%. The key feature of the dividend is the payout ratio – at just 24%, it indicates that the dividend is easily sustainable at current income levels, and the company has plenty of room for potential increases. BJRI has raised the dividend after every four quarters over the past two and a half years.
Like the other stocks on this list, insiders have been sending strongly positive signals on BJRI in recent days, purchasing a total of $268,000 worth of shares. The company’s Executive VP and Chief Development Officer, Gregory Lynds, made the largest purchase, worth more than $246,000. He currently holds over $926,000 worth of BJRI shares.
Top analysts like what they see in BJRI. Wedbush analyst Nick Setyan sees a compelling case for the stock in the company’s business model: “We view BJRI's new value pipeline (take-home entrees, lunch combos, daily specials), digital initiatives, supported by the ongoing traction in loyalty, off-premise growth, (~10% mix) marketing, the testing of a subscription-based beer club, and another year of 2-3% average check growth as ongoing drivers of growth.”
Setyan gives BJRI a Buy rating and a $46 price target. His target suggests an upside of 40%. (To watch Setyan’s track record, click here)
In addition, 5-star analyst Brian Bittner, with Oppenheimer, gave BJRI stock a $47 price target to back his Buy rating, implying a robust 43% upside.
Supporting his upbeat outlook, Bittner wrote, “…the stock underperformed in 2019. We upgraded shares around current levels mid-year. Valuation now stands at an attractive 6.7x EV/EBITDA and a 14-15% steady-state FCF yield based on our work. This could gain the interest of a suitable buyer.”
After this company’s 2019 underperformance, the analyst consensus rating is a Moderate Buy, based on 3 Buys, 4 Holds, and 1 Sell. Shares are priced at $32.36, and the average price target of $42 suggests an upside potential of 29%. (See BJ’s Restaurants’ stock analysis at TipRanks)