Follow the Leaders: 7 Stocks With Strong Insider Confidence
While no one methodology offers guarantees in the equities market, targeting stocks with insider buying could be a compelling and profitable approach. Basically, the thesis surrounds the nature of such transactions. Frankly, insiders sell securities for a variety of reasons, including mundane ones like tax considerations. However, there’s only one reason to buy a security: you believe it will move higher.
Another factor that makes stocks insiders are buying so attractive is the alignment of interests. Imagine that you’re onboard an airplane flying across the continental U.S. That’s about a five-hour flight or so, depending on the direction. Chances are, irrespective of the length of the flight, you want your pilot in the airplane with you.
Now, the presence of a pilot doesn’t guarantee a safe landing. Obviously, in the history of aviation, stuff happened and they will unfortunately continue to happen (hopefully with less frequency). But no matter what, it’s better to have a pilot than no pilot onboard. On that note, below are stocks with insider buying to consider.
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Broadcom (AVGO)
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A multinational designer, developer, manufacturer and supplier of a wide range of semiconductor products, Broadcom (NASDAQ:AVGO) ranks among the most relevant technology enterprises. It’s not surprising, then, that the company also represents one of the stocks with insider buying. Per Gurufocus, two directors – one on Sept. 6 and the other on Sept. 15 – acquired shares of AVGO.
To be fair, Broadcom has witnessed a spike in insider selling this year as well, more so than acquisitions. So, why mention it among stocks insiders are buying? For one thing, AVGO has been a top performer this year, gaining nearly 71% since the January opener. Yet the two directors anticipate further growth, which is a significant catalyst, at least from a sentiment perspective.
Second, AVGO offers an alternative to overheated semiconductor specialists. While I wouldn’t call Broadcom a steal, its forward earnings multiple of 21.09x is far more palatable than some other stats in the chip-manufacturing space. Plus, analysts consider the tech giant a consensus strong buy.
Five Below (FIVE)
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A chain of specialty discount stores, Five Below (NASDAQ:FIVE) distinguishes itself from similar enterprises with its pricing variety. Most of its products go from $1 to $5, hence the name. However, a select few products sell for up to $25. Therefore, Five Below isn’t just a discount store for the desperate. Instead, it offers an attractive canvas for good old bargain hunting.
Further, the underlying business model aligns with increasingly negative fundamental sentiment. Per CNBC, many experts believe that a downturn of some sort is inevitable. If so, households will be incentivized to save money wherever possible. Cynically, this framework should help lift FIVE. Subsequently, it’s no surprise to see shares rank among stocks with insider buying.
In particular, Five President and CEO Joel D. Anderson bought 3,100 shares in early September. To be fair, many other executives dumped out of FIVE stock. However, when head execs decide to put their money where their mouth is, it means so much more. As well, FIVE earns a strong buy assessment from analysts.
Emerson Electric (EMR)
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Based in Ferguson, Missouri, Emerson Electric (NYSE:EMR) manufactures products and provides engineering services for industrial, commercial and consumer markets. Both the company’s website and its Form 10-K deploy word salad to describe its business: automation, cohesion, acceleration, efficiencies, challenges and value. Since the start of the year, EMR slipped roughly 9%.
Perhaps the biggest (tangible) takeaway here is that it’s one of the top stocks with insider buying. Per Gurufocus, Emerson President and CEO Lal Karsanbhai bought 10,000 shares of EMR on Nov. 17. Earlier this month, four directors also acquired EMR, in total adding 14,400 shares to their holdings. If you’re looking for a confidence boost, that’s it.
Another factor moving in favor of Emerson is its value proposition. Right now, shares trade at only 3.84X trailing earnings. In contrast, the industrial products industry features an average multiple of 22.63X. As well, it offers a forward dividend yield of 2.39%. Combined with a moderate buy consensus view, Emerson brings an enticing narrative to the table.
Corteva (CTVA)
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As a major agricultural chemical and seed company, Corteva (NYSE:CTVA) symbolizes one of the most relevant stocks insiders are buying. Unfortunately, that hasn’t helped the cause in terms of market performance. Since the beginning of this year, CTVA lost nearly 23% of equity value. In the past 52 weeks, it dipped almost 31%, which is obviously problematic.
However, the underlying fundamentals for Corteva command permanent relevance. In future conflicts, nations might not fight over oil rights but rather resources necessary for basic sustenance. Therefore, I can’t say I’m shocked that several C-suite members decided to buy shares earlier this month. Most notably, Corteva CEO Charles V. Magro bought 40,000 shares back in February.
Also, in terms of book value, CTVA trades at 1.28X. That’s undervalued compared to agriculture industry’s average book multiple of 1.63X. Notably, the company enjoys strong gross and operating margins. As a small bonus, Corteva offers a forward yield of 1.4%. Lastly, analysts rate CTVA a moderate buy with a $55.93 average price target.
Keurig Dr Pepper (KDP)
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A multinational soft drink company, Keurig Dr Pepper (NASDAQ:KDP) fundamentally might benefit from the trade-down effect. Should economic conditions experience a slowdown, consumers will likely pivot their expenditures from food and beverage retail places to the grocery stores. In turn, this transition should cynically help KDP. And it does need help, suffered red ink since the start of this year.
Still, it’s been bouncing back quite sharply in recent sessions, supporting the case that KDP is one of the stocks insiders are buying. Notably, Keurig’s Chief Operating Officer Timothy P. Cofer bought 100,000 shares of KDP on Nov. 8. Late last month, the company’s Chief Research and Development Officer acquired 7,050 shares. In early August, the same officer had 53,837 shares.
On paper, Keurig doesn’t necessarily distinguish itself with sterling financials. However, it does command overall excellent margins, leading to consistent profitability over the past decade. Sure enough, the firm also offers a forward yield of 2.64%. Analysts peg KDP a moderate buy, making it one of the intriguing stocks with insider buying.
Simon Property Group (SPG)
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Fundamentally, Simon Property Group (NYSE:SPG) appears the riskiest name among stocks insiders are buying, at least as far as this list is concerned. In many other circumstance, Simon Property – a real estate investment trust (REIT) supporting shopping malls and outlet centers – may be reasonable speculation. Unfortunately, the Covid-19 crisis did a number on the business.
Now, certain elements appear to be favorable to Simon. In particular, The Wall Street Journal reported that this past Black Friday resulted in strong spending. Foot traffic at U.S. retailers rose 2.1% from last year, with the health and beauty segment witnessing double-digit percentage increases. So, for the moment, people appear to be willing to buy retail at brick-and-mortar locations.
With that in mind, the inside acquisitions don’t seem so reckless. Several directors bought SPG in September this year. Additionally, March and June so a flurry of activity, making SPG one of the top stocks with insider buying. Providing some confidence, analysts rate SPG a consensus moderate buy.
Occidental Petroleum (OXY)
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On the surface, Occidental Petroleum (NYSE:OXY) might not seem the wisest of investments for the long haul. While the world runs on hydrocarbons today, tomorrow (figuratively speaking) could be a different story. With political forces pushing for clean and renewable sources of energy along with the rising popularity of electric vehicles, Occidental’s days seem numbered.
Still, I think it’s possible that Occidental could stay relevant for years if not multiple decades. First, we’ve got to talk about energy density. Compared to most other sources, hydrocarbons carry significant bang for the buck. That’s why a jug of gasoline will do more for a combustion-powered car than a similar amount of electrons for an EV.
Second, acute geopolitical tensions almost surely means that we must diversify our energy portfolio, not exclude one for another. Sure enough, Warren Buffett via Berkshire Hathaway (NYSE:BRK.B) has been busy picking up a countless number of shares over the past several months.
Finally, analysts peg OXY a moderate buy with a $72.17 average price target.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
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