Corporate officers – the executives who run companies, and the board members who oversee the corporations – are not just business administrators, they are usually active traders, too. Their positions as the helms of companies give them a unique insight into their own companies’ market potential. It’s only human nature to use this knowledge in stock trades; to keep the playing field level, insiders are required to make report their inside trades on a quarterly basis.
The trading information reported by corporate insiders makes a fine resource for the general trading public. It’s a clear guide to which companies have the confidence of their officers; and these days, as companies struggle to recover from the recessionary pressures of the coronavirus economic turndown, that confidence is a positive signal for investors.
And positive investment signals are what traders want to see right now. This makes following corporate insiders, and watching especially those insiders who have been willing to lay down large sums for large purchases, a viable strategy for building a post-corona portfolio.
With this in mind, we’ve used the TipRanks Insiders’ Hot Stocks tool to pull up three companies whose officers have made recent ‘informative buys,’ telling us that these stocks are worth a closer look.
First Midwest Bancorp (FMBI)
First Midwest is the holding company controlling the First Midwest Bank, based in Chicago, Illinois. The Bank is a full-service entity, providing retail banking, trust and investment management services, consumer banking services, and wealth management to individual and commercial customers in the greater Chicago area. The company boasts $20 billion in total assets, $14 billion in total deposits, and presence in the neighboring states of Indiana, Iowa, and Wisconsin.
The insider moves over the past three months have all been informative buys. No fewer than 11 company officers have bought FMBI shares in the past week, with purchases ranging from $25,000 to $300,000. Two typical transactions will suffice to show the activity. The single largest transaction, by Board of Directors member Kathryn Hayley, was for 12,000 shares and totaled $300,000. Company chair and CEO Michael Scudder laid out $100,000 for 4,000 shares. The 11 transactions together have swung the insider sentiment on FMBI strongly positive.
In another point of interest to investors, FMBI declared its regular quarterly dividend of 14 cents per share. This payment, which annualized to 56 cents, gives a yield of 3.1% -- more than double the average dividend yield found among S&P listed companies.
Nathan Race, covering this stock for Piper Sandler, noted, “We remain OW as we believe shares warrant a modest P/TBV premium vs. peers given FMBI's relatively superior PPNR ROA power that should be more capable of absorbing hopefully less-than-peer NCOs going forward."
Race backs his Overweight (i.e. Buy) rating on FMBI with a $15 price target. (To watch Race’s track record, click here)
Overall, First Midwest has a Moderate Buy from the analyst consensus rating, based on 3 reviews. These break down to 2 Buys and 1 Hold. The shares are currently trading for $13.70, and the average price target of $14 suggests a modest upside of 2.2%. (See FMBI stock analysis on TipRanks)
Cannae Holdings (CNNE)
Cannae is a diversified holding company, whose subsidiaries invest in Restaurant, Technology Enable Healthcare, and Financial Services companies. Cannae’s portfolio is worth over $1.2 billion at book value, and includes 17 companies. Cannae invests in target companies through ownership, operations, and monetization strategies.
The company uses subsidiaries to conduct business, and in May and June invested heavily in two ‘blank check’ acquisition companies, Trebia and Foley Trasimene. Both of these companies are recent incorporations, designed to acquire businesses through mergers, asset acquisition, stock purchase, and reorganization – the strategies that Cannae uses. It’s perhaps important to note that both acquisition companies, like Cannae, are named for famous victories by Hannibal.
Recent insider moves have swung the sentiment needle on CNNE 100% positive in recent days. Three company officers have made purchases of CNNE shares since June 17 of $1 million. Brent Bickett, company President, Richard Cox, EVP and CFO, and Richard Massey of the Board of Directors each purchased a block of 26,667 shares. Each insider put up just over $1 million for the stock. The timing coincides with Cannae’s purchase of Trebia as a subsidiary.
Covering this stock for Stephens, 5-star analyst John Campbell sees a clear buying opportunity here. He writes, “In our view, CNNE is an under-covered, under-appreciated stock so, at times, it does run into valuation disconnects that tend to open up good buying opportunities for close followers of CNNE or for those new investors that are sizing it up at the right time. We believe that CNNE has entered that type of buying window as the stock is trading a mere 2% above its adjusted book value…”
To this end, Cannae rates CNNE shares an Overweight (i.e. Buy) along with a $43 price target, suggesting the stock has a 10% upside potential in the coming year. (To watch Campbell’s track record, click here)
JMP Group (JMP)
We’ll finish today’s list with a penny stock. JMP Group, a holding company, owns three subsidiaries that operate in the investment banking and asset management sector. The company provides senior management services, equity research, and institutional sales and trading services for corporate clients and their investors.
Corporate insiders have been buying JMP shares over the past month. CEO Joseph Jolson has bought up over 107,000 shares in May and June, for a declared price exceeding $292,000. These buys have swung the needle positive on insider sentiment for JMP shares.
Barrington analyst Alexander Paris sees JMP as an affordable stock with an attractive point of entry in current conditions. He writes, “JMP … trades at 0.7x adjusted book value, a discount to both the small cap broker/dealer peer group (0.8x BV) and the alternative advisory peer group (3.5x). Given its discount valuation and our expectation things will improve in the second half of the year, we are maintaining our OUTPERFORM investment rating.”
Paris’ Outperform, equivalent to a Buy, comes with a $3.50 price target, suggesting that JMP has room for 25% upside growth in the coming year. (To watch Paris track record, click here)
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