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Should Insider Buying Tempt You Into These 3 Stocks?

Markets were rising again this week, with near-15% gains on both the S&P 500 and the Dow Jones. Traders’ morale has clearly improved this week, and there is real hope that stocks are turning around after their steep fall in recent weeks.

The positive turn in stocks has investors looking for new investments, which in turn has them looking for a strategy. Plenty of investment strategies can steer you toward profits, but there is one possibility that might make investing easier – just follow the insiders.

Corporate insiders have been snapping up stocks during the downturn, making large purchases at low prices. Insider purchases have outperformed the indexes by 4.5% in recent years, which is no surprise; by definition, insiders have knowledge that is not necessarily available to the wider public.

TipRanks offers an Insiders’ Hot Stocks tool, an invaluable guide to finding the stocks that the insiders are gobbling up. We’ve pulled up three stocks featuring bargain prices and upsides over 40%. In addition, each stock offers investors a guaranteed return, with a divided of at least 4.5%. Let's take a closer look.

Essential Properties Realty Trust (EPRT)

We’ll start with a real estate investment trust, as these stocks are already well known for giving high returns. Essential Properties manages commercial real estate, mostly single-tenant properties under long-term leases, in service-oriented business niches. The company has properties in 46 of the 50 states.

EPRT’s stock has rebounded somewhat in recent days, more than doubling from the low point it hit on March 18. Even after doubling, however, the stock’s dividend is still yielding 6.1%. The annualized payment is 92 cents per share, or 23 cents quarterly. The payout ratio is 76%, showing that the company is committed to returning profits to shareholders, and has room for further dividend growth if necessary.

Insiders have been racing to buy up shares. There have been four major insider purchases, all by members of the Board of Directors. The largest purchase, of $353,000, was by Anthony Dobkin, who is also the company’s interim CFO. Scott Estes, a Director and company VP, bought $313,000 dollars’ worth of shares. The other two large purchases totaled $280,000 together, and were made by Directors Paul Bossidy and Stephen Sautel. These purchases, along with several smaller ones, bring the insider action on EPRT to nearly $1 million in the past few weeks. This activity has skewed the insider sentiment on this stock strongly positive.

This REIT’s portfolio of middle-market retail space leaves it somewhat exposed to the coronavirus downturn – not so much from direct losses, but rather due to potential tenant credit issues. Still, Ladenburg Thalmann analyst John Massocca believes that EPRT has a solid position and can counterbalance the possible problems. He notes several points in support of his thesis: “1.) a record low interest rate environment, 2.) EPRT's low leverage of 3.6x net debt/EBITDA at 4Q'19 end and pro-forma for the January 2020 follow-on, and 3.) strong debt availability of $524M between amounts undrawn on a term loan and the REIT's revolver.”

Massocca puts a Buy rating on this stock, and his $27 price target implies an upside of 79%. (To watch Massocca’s track record, click here)

Both most recent reviews on EPRT are Buys, making the analyst consensus here a Strong Buy. Shares are priced at a discount, just $15.12, and the average price target, $27, matches Massocca’s, with it’s 78% upside potential. (See EPRT stock analysis at TipRanks)

Camping World Holdings (CWH)

This company lives in a specialized niche, as a leading retailer of RVs, associated camping gear, maintenance gear, and a range of support services and protection plans, products, and resources. CWH operates in 36 states, and boasts over 200 retail locations.

In the last quarter, CWH closed out its non-RV retail activities, incurring one-time liquidation and store closure costs, which were reflected in a Q4 earnings loss that was deeper than expected. The company reported 35 cents per share net loss, against an estimate of 27 cents. Earnings were down 1.8% year-over-year, with $964.93 million reported.

Despite losses, CWH has been keeping up its dividend payment. The current quarterly payment, 15.5 cents, has been steady for the last two years. Annualized, CWH pays out 32 cents per share, for a yield of 4.53%. This is more than double the average dividend yield on the S&P 500, and gives this stock a strong return value.

There have been 5 major insider purchases of CWH stock in the past three weeks. The largest purchase, made in three blocks, was by Marcus Lemonis, company CEO. Lemonis’ purchases, all made this month, totaled 200,000 shares and cost him over $1.7 million. CFO Melvin Flanigan made the second-largest purchase, worth $213,000 and comprising 22,000 shares, on March 9. Together the five large purchases totaled $2.26 million, and give a clear sign of management confidence in the company’s direction.

Rick Nelson, covering the stock for Stephens, points out the turmoil and churn the company has experienced, and adds that the long-term benefit should be substantial. He writes, “…the decision to close the non-RV retail business weighed on results via heavy liquidation sales and store closing costs… We like the decision, however, as it focuses the Company on the core RV business and allows potential recapture of $35 mil. to $45 mil in adj. EBITDA in F20 as losses are eliminated.”

Nelson gives this stock a price target of $21, implying an upside potential of 197%. He describes CWH as ‘volatile,’ but rates the stock a Buy. (To watch Nelson’s track record, click here)

The analyst consensus rating on CWH is a Hold, based on a split among 4 reviews: 1 Buy, 1 Sell, and 2 Holds. The stock is selling for only $7.06 per share, and the average price target, $10.75, suggests room for 52% upside growth. (See Camping World’s stock analysis at TipRanks)

Macerich Company (MAC)

Last on this list is another REIT, Macerich. This company owns 53 commercial properties in the US, which have more than 50 million square feet in leasable area. Macerich is the third-largest owner and operator of shopping center in the US, and while that may seem to make vulnerable to the coronavirus lockdowns, the company still managed a Q4 year-over-year EPS gain. Earnings came in at 19 cents per share, well over double the year-ago figure of 8 cents.

Quarterly revenue did not do as well. The total came to $241.84 million, down 2% from the year before.

The earnings and revenue were enough for the company to continue supporting its strong dividend. MAC pays out 10 cents per quarter, or 40 cents annually, and gives a yield of 5.8%. Investors will be hard-pressed to find a better yield in other sectors – Treasury bonds are down below 1%.

In the past week, three company officers have made purchases totaling $69,000, $63,000, and $79,000, each for a block of 10,000 shares. The officers include Ann Menard, Chief Legal Officer, Scott Kingsmore, CFO, and Kenneth Volk, Executive VP. The purchases are the latest in a series of ‘informative buys’ of this stock over the past month, totaling more than $1.4 million. Management is confident in the company – enough to keep buying in.

Evercore ISI’s analyst Samir Khanal is also confident in MAC shares. He gives the stock a Buy rating, and his $30 price target indicates the extent of his confidence: a whopping 335% upside potential.

In his comments on Macerich, Khanal says, “While we recognize that it may be early to know exactly what the damage or the financial impact from COVID-19 will be on MAC, or the mall sector at large, we are taking a proactive step to address potential impacts that may occur especially if the virus is prolonged.” The analyst adds that MAC is taking steps to protect its leases in the near-term. (To watch Khanal’s track record, click here)

Overall, MAC shares are rated a Moderate Sell by the analyst consensus. There are seven reviews, breaking down as 1 Buy, 2 Holds – and 5 Sells. Shares are priced low, at $6.90, and have an average price target of $23.86, suggesting a possible 245% upside. (See Macerich’s stock analysis at TipRanks.)