When I am analyzing a company to see if it could potentially be a good long-term investment, I always research what the insiders are doing. It goes without saying that they probably have a much better idea of what is happening in the company than most analysts and they certainly know more about it than I do. I especially like to see what they are doing after their company’s stock has fallen dramatically.
I am not implying that there is anything illicit or illegal going on. When an insider wants to buy or sell their company’s stock they can, as long as they follow very strict procedures. For instance, they have to file their intent to buy or sell with the SEC, and they are subject to “blackout periods,” which are times in which they cannot trade the stock.
For example, an insider may be prohibited from buying or selling the stock in the thirty days before or after the earnings release is due to be reported.
What’s more, an officer or a director of a company may decide to sell their stock for many reasons. They could need to raise money for tuitions, mortgages, weddings or even divorce settlements. But the insiders only buy for one reason: if they believe that the stock is undervalued and that it will eventually trade at a higher price where they can make a profit.
The following stocks have experienced such insider buying, and as such, are worthy of further inspection:
EQT Corp (EQT)
Click to Enlarge EQT Corp. (NYSE:EQT, $21.61) deals with natural gas in the Appalachian area. You may have never heard of EQT corporation, but you have probably used their products, as it’s the largest producer of natural gas in the United States.
Insider buying at the EQT Corporation has been prolific. The President, Robert McNally, bought almost 21,000 shares on March 29 at an average price of $20.80. He spent $200,000. The Executive Vice President, Erin Centofanti, bought almost 8,000 shares on March 29 at $20.83. Sue Smith, the CFO, paid $19.75 for 6,000 shares on March 14.
Back in February Jonathon Lushko, the General Counsel and a Senior VP of the company, purchased almost 8,000 shares on the open market at an average price of $19.04. That is an investment of almost $150,000. In addition, the Senior VP of Human Resources, David Smith, invested more than $300,000 when he purchased 16,800 shares of the stock at an average price of $19.06.
It is always interesting to see if and when the insiders buy their company stock after it has sold off significantly. In this case, the price of
EQT has fallen about 50% in less than a year. This could be the reason why these insiders decided to invest. The stock is currently trading around $21.61, so they have already profited nicely.
The analysts on Wall Street seem to like this stock as well. According to MarketWatch, twenty firms follow it on a research basis. Two
of them have it rated as overweight, eleven have a buy rating on it, six rate it as holds and there’s just one sell recommendation. The average target price is $25.40, which is about 20% higher than where it is currently trading.
Click to Enlarge RumbleOn, Inc. (NASDAQ:RMBL, $5.60) is an e-commerce platform that is designed to help consumers and dealers finance, buy and sell used cars.
Denmar Dixon is a member of the Board of Directors of RumbleOn. Mr. Dixon purchased 50,000 shares at $4.76 in early April. He also made considerable purchases early last year before the stock rallied. Back then, it was trading around the same levels that it currently is.
The stock more than doubled when it traded above $10 in September and October. Mr. Dixon must have been feeling pretty good. But then it went into freefall and lost more than 50% of its value by December.
This company is followed on a research basis by six companies. The average rating is a buy and the average target price is $9.90, which is more than 40% higher than where it is currently trading.
Click to Enlarge Endologix, Inc. (NASDAQ:ELGX, $6.99) performs research and development and manufactures devices that treat aortic diseases. Its portfolio of products includes AFX Endovascular AAA System, Nellix and Ovation.
On April 3, it was announced that the CEO, John Onopchenko, invested $200,000 when he purchased just over 30,000 shares. This increased his personal holdings in the stock by almost 40%. The CFO, Vaseem Mahboob, invested $100,000 of his personal money when he acquired 15,000 shares. In addition, two of the company’s directors bought and additional 25,000 shares. These shares were all purchased at an average price of $6.61.
Endologix has lost more than 90% of its value over the past year. They have recently announced that they are going to restructure their debt. This could be a good thing, or it could be a sign of desperation. The insider buying may mean that the insiders think that the restructuring will work.
According to MarketWatch, nine firms follow this stock on a research basis. One has a buy rating on it, one has a sell rating and the other nine consider it a hold. The average target price is $10.30, which is significantly higher than where it is currently trading. This makes me wonder why seven firms have a hold on a stock that they feel is undervalued by 35%.
Click to Enlarge You’ve probably been to Walgreens (NYSE:WBA, $54.69). It’s one of the largest pharmacies in the country, with retail and pharmacy operations both domestically and on an international stage. The company was founded in 1901 and is headquartered in Deerfield, IL.
Co-Chief Operating Officer Ms. Omella Barra may think that the recent selling in WBA is overdone. She invested nearly $1 million of her own money when she purchased 18,000 shares at an average price of $54.50 on April 3.
WBA has had some issues lately. The company has sold off considerably because the two most recent earnings releases disappointed investors. The stock has fallen about 35% since November and it is trading at the lowest level that it has been at since 2014. Time will tell if there will be more insider buying.
This company is widely followed on Wall Street. According to Marketwatch.com, 26 firms cover it. The average analyst rating is a hold and the average price target is $62.50. It is currently trading just under $55.
Chaparral Energy (CHAP)
Click to Enlarge Chaparral Energy, Inc. (NYSE:CHAP, $5.58) is in the natural gas and oil exploration and production (E&P) business. Specifically, CHAP makes its money on deposits of Stack, Meramec and Osage, Oswego and Woodford located in Oklahoma and the Texas Panhandle. Founded by Mark A. Fischer and Charles A. Fischer in April 1988, Chaparral Energy is headquartered in Oklahoma City, OK.
The CEO of the company, K. Earl Reynolds, purchased 7,100 shares of CHAP on March 29th at an average price of $4.64. A large institutional holder, Strategic Value Partners, also recently acquired 900,000 shares at a price of $4.45.
The stock has fallen by more than 75% over the past year. Mr. Reynolds and the portfolio managers at Strategic Value Partners must believe that the stock is very attractive at these prices.
Wall Street likes this stock as well. It is followed by four firms that follow the company on a research basis. The average rating is a buy and the average target price is $18.38. That is more than 300% higher than where it is currently trading.
As of this writing, Mark Putrino did not hold any positions in the aforementioned securities.