Profitable investing is all about making the right choices and finding the stocks to build a portfolio that will generate positive returns no matter what happens. The challenge now can be summed up in the range of headwinds pushing against the markets. Investors have to contend with high inflation, and the prospect of higher rates going forward, as Fed chair Powell has indicated that the central bank’s priority will be to tame it.
But that doesn’t mean there aren’t opportunities to seek out in the current environment; one way to find them is by taking cues from the insiders - the corporate officers with responsibility for ensuring company profits as well as stock performance, enforced by Board and shareholder oversight.
Using the Insiders’ Hot Stocks tool, we’ve found two equities that offer investors strong upside potential, according to Wall Street analysts – and have also picked up large buys from those in the know. Let’s see why the insiders think now is the right time to pounce.
Cassava Sciences (SAVA)
We’ll start with Cassava Sciences, a clinical stage biopharmaceutical firm focused on the detection and treatment of Alzheimer’s disease. Cassava has one leading drug candidate, simufilam, which is undergoing Phase 3 clinical trials, as well as a diagnostic product, SavaDx, designed to detect Alzheimer’s through an ordinary blood draw.
Cassava has faced some idiosyncratic headwinds recently, due to a regulatory investigation into charges of data manipulation of the simufilam clinical trials. Last month, however, the company was fully cleared of those charges in a study published by the peer-reviewed Journal of Prevention of Alzheimer’s Disease (JPAD).
The JAPD review was not Cassava’s only good news recently. The company reported that simufilam now has over 400 patients enrolled in two Phase 3 clinical studies, and that interim data on the first 100 patients to complete the open label study showed that simufilam was safe and well tolerated. Also of note, 63% of patients in that open label study showed a significant improvement in cognitive testing. An additional 21% of patients showed a cognitive decline of less than 5 points. The company expects the open label study to be completed by 4Q22.
In his review of this stock, H.C. Wainwright analyst Vernon Bernardino points out the JPAD review, and goes on to say, “We note that similarly, in December 2021, the Journal of Neuroscience (JN) also investigated and found no evidence of data manipulation by Cassava in a 2005 paper published in JN. Lastly, in November 2021, JN also investigated and found no evidence of simufilam data manipulation in a paper JN published in July 2012. We see these critical reviews as positive for Cassava, as they confirm allegations of data manipulation were false and removed a negative overhang that has depressed Cassava stock. Importantly, they reconfirm that simufilam has a positive effect on biomarkers of AD. We believe conclusions by these journals and support simufilam’s continued clinical study in AD…”
On the SavaDx track, Cassava continues to evaluate the investigational product in the anti-body based detection of the filamin A protein. While Cassava’s testing of Dx is ongoing in conjunction with third parties, simufilam is the higher-priority program.
Turning to the insider trades, we find that there have been two major insider purchases over the past month. The company has an overall ‘very positive’ sentiment from the insiders, and these two informative buys start at more than $800,000 worth of shares. At that level, Board member Richard Barry spent $860,223 picking up 36,159 shares. Stepping up a level, another company director, Sanford Robertson, bought 100,000 shares for $2.069 million.
Bernardino appears to echo the insiders’ sentiment. The analyst puts a Buy rating on SAVA and his $124 price target suggests a one-year gain of a whopping 402%. (To watch Bernardino's track record, click here)
Overall, Cassava has picked up 4 analyst reviews, and these include 3 Buys and 1 Sell, for a Moderate Buy consensus rating. The shares are priced at $24.68 and their $69 average price target implies an upside potential of ~180% for the coming year. (See SAVA stock forecast on TipRanks)
MGM Resorts (MGM)
For the second stock we’ll shift our focus from biopharma to entertainment and leisure. MGM Resorts is one of the storied names on the Vegas Strip, but also operates resort locations in New Jersey, Massachusetts, Maryland, Mississippi, and Michigan. The company’s attractions include resort hotels, full service casinos, spas and salons, and more. Overall, the company has 32 resort and gaming locations.
In the most recent quarter, 2Q22, the company brought in $3.3 billion in revenues, up 44% from the $2.3 billion reported in the year-ago quarter. This led to a net income of $1.8 billion, a far cry higher than the $105 million reported in 2Q21 although that included a gain associated with the deconsolidation of MGM Growth Properties. This net income gave a diluted EPS of $4.20, some distance above the 14-cent diluted EPS reported one year earlier. MGM Resorts finished Q2 with $5.78 billion in cash and liquid assets, a gain of 22% from the end of December, 2021.
The most recent informative insider trade comes from one of the company’s Board of Directors members, Janet Swartz. Swartz bought 14,230 shares, for which she spent $498,762. This brings her total current holdings in MGM to $1.56 million.
Analyst David Katz, covering MGM for Jefferies, writes of the company and stock: “The better than expected results reflect strong Strip performance and regional resilience and should drive a positive reaction. With a strong fundamental set-up, we expect strength in Las Vegas through rest of the year. More importantly, with interest and rent escalators relatively fixed, we expect productive FCF to continue, supporting ongoing shareholder returns and allowing the company to pursue inorganic growth.”
Katz’s comments lead him to give MGM shares a Buy rating, and his price target, set at $56, indicates confidence in a one-year upside potential of 70%. (To watch Katz’s track record, click here)
This big-name stock has 12 recent analyst reviews, breaking down 9 to 3 in favor of Buy over Hold for a Strong Buy consensus rating. The shares are priced at $32.86 and their $52.58 average price target suggests a 60% upside in the next 12 months. (See MGM stock forecast on TipRanks)
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.