After the pandemic and economic hit in the first half of the year, the markets have found a clear path forward. The S&P 500 is up 8% year-to-date, and the NASDAQ has gained 30% this year.
The gains are heading into the rarefied reaches of the financial stratosphere, and it’s important not to lose perspective. Rapid, large, gains like these can easily put investors into a buying mood, just picking up any convenient stocks as they follow the herd’s buying trend. Instead, investors should take a step back, and use a data-driven signal to find stocks that are likely to take a lead.
Corporate insiders can provide just such a data signal. These company officers – by virtue of their positions in upper management – have access to information that is simply not available to the general investing public. And, unlike the general public, they are responsible to shareholders and Boards of Directors for bringing in positive results. So, when they start buying up stock in their own companies, it’s a sign that investors should heed.
To make that search easier, the TipRanks Insiders’ Hot Stocks tool gets the footwork started – identifying stocks that have seen informative moves by insiders, highlighting several common strategies used by the insiders, and collecting the data all in one place.
Fresh from that database, here are the details on three stocks showing ‘informative buys’ in recent days.
iMedia Brands, Inc. (IMBI)
We’ll start with online shopping, a sector that has gotten a lot of attention during the pandemic period. iMedia Brands is the owner of ShopHQ and a half-dozen sister brands, offering a variety of goods and services: health and wellness products, jewelry, online streaming, and even tech logistics.
The social distancing and lockdown policies put in place to combat the coronavirus have been a boon for online vendors, as brick-and-mortar retailers felt the pinch of lost customer traffic. IMBI’s share price slipped when the markets crashed in late winter – but the stock has recovered, and then some. IMBI is now up nearly 70% year-to-date, strongly outperforming the general markets.
Revenues slipped in Q1, losing 22% sequentially, but quickly turned back upwards. The Q2 top line, at $124 million, recouped the Q1 losses and came in slightly higher than the 4Q19 figure. The stronger second quarter earnings were reported at the same that iMedia announced a $15 million offering of common stock, totaling 2.4 million shares. And that brings us to the insider purchases.
In the end of August, Board of Directors member Eyal Lalo put down $1.6 million for a bloc of 256,000 shares in IMBI. It was Lalo’s second large insider buy of IMBI this year – and this one purchase pushed the insider sentiment on the stock far above the sector average, to a strongly positive reading.
Lake Street analyst Mark Argento sees iMedia Brands holding a strong position in its marketplace. He writes, “We expect revenue to continue to benefit from improved product/pricing discipline, new product launches, and the stay-at-home trend over the coming quarters. We expect the build-out and growth of the company's more specialized channels and OTT platform to further benefit the top line over time. Going forward, we believe the improved level of profitability is sustainable…”
In line with his optimism, Argento rates IMBI stock a Buy. His $13 price target implies an upside potential for the coming year of 93%, impressive by any standard. (To watch Argento’s track record, click here)
Overall, the Wall Street analyst consensus on iMedia Brands is a unanimous Strong Buy, based on 3 recent reviews. The shares are selling for $6.73, while the $11.50 average price target suggests a one-year upside of 71%. (See IMBI stock analysis on TipRanks)
Next on our list is SmileDirectClub, the dental telemedicine startup. This company specializes in clear aligners, an alternative to traditional braces and one that is growing in popularity. SDC’s customers interact with the company via two-way video link, consulting with licensed dentists and orthodontists who guide them through the process for taking tooth impression and making the aligner molds. The final product is manufactured by 3D printing and returned to the customer via mail. The growth of telemedicine has been accelerating in recent years, and the COVID-19 crisis has only reinforced that trend.
Company insiders are clearly confident in SDC’s future, as evidenced by strong buying activity over the past two weeks. Four SmileDirectClub officers have bought up large blocs of shares. The largest purchase, and easily the most notable, was for $10.32 million. Company CEO David Katzman bought 1.278 million shares in the company this week.
Robbie Marcus, a 5-star analyst from JPMorgan, agrees that SDC is a stock to buy, and explains his reasoning: “…we’re encouraged by management’s commitment to its 4Q adjusted EBITDA profitability target and see a clear path toward this target as second gen automation comes online and the company continues improving selling & marketing leverage. When coupled with conservative guidance for 3Q and recent wins on the legal front (here), we remain bullish on the company’s outlook for 2H…”
To this end, Marcus backs his Overweight (i.e. Buy) rating with a $14 price target, predicting an 18% growth potential this year. (To watch Marcus’ track record, click here)
Overall, with 8 recent reviews, including 6 Buys and 1 each Hold and Sell, SmileDirectClub gets a Moderate Buy rating from the analyst consensus. The analysts believe the share price will remain range-bound, as indicated by the $10.14 average price target. (See SDC stock analysis on TipRanks)
American Assets Trust (AAT)
Last on our list today is American Assets Trust, a San Diego-based real estate investment trust with a portfolio of high-end office, retail, and residential properties on the West Coast and in Hawaii. The company’s portfolio includes 3.1 million square feet of retail space, 3.4 million square feet of office space, and 2,112 multifamily rental units.
Like most REITs, American Assets Trust pays out a generous dividend. The company did cut back on the payment, reducing it from 30 cents per common share to 20 cents for the June quarter payment, in order to maintain viability. At that rate, the dividend has an annualized payout of $1.00 and a yield of 3.93%.
This dividend is supported by earnings that have remained positive despite the coronavirus and economic crises. Q1 EPS was stable – 56 cents per share it matched the previous quarter. Q2 EPS slipped to 48 cents, but beat the forecast by 29%.
While AAT shares are down 41% year-to-date, management’s confidence is made clear by an informative buy from CEO Ernest Rady who bought 20,000 shares worth $506,000 in the end of August.
Wells Fargo analyst Tamara Fique sees strength and reason for optimism in the company’s rent collections and overall liquidity.
“AAT’s rent collection rate averaged 82.7% in Q2, including 98% for office, 95% for multifamily, and 58% for retail. To date, July rent collections have improved to 83.3% on average with retail improving 450 bps to 70.1% from the June level… AAT has $396MM in liquidity, including $146MM of cash and $250MM available on its line of credit. It has no debt maturing for the remainder of 2020…”
Following her comments, Fique rates the stock an Overweight (i.e. Buy) and her $33 price target suggests that it has room for a 28% upside in the coming year. Fique’s is the only recent review on record for this stock. (To watch Fique’s track record, click here)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.