With countries around the world drafting their exit strategies in preparation for life after COVID-19 lockdown, all eyes are on the market. Promising data from the trial evaluating Gilead’s (NASDAQ:GILD) COVID-19 treatment and the U.S. government’s stimulus measures indicate the storm brewing over Wall Street might be clearing. Investors wonder which stocks to buy will be survivors.
While these developments are encouraging, U.S. crude futures turned negative for the first time in history on April 20 as lockdowns erase oil demand. This reflects the extent of COVID-19’s damage to the economy. As a result, market watchers are looking to the insiders, hoping insights from their activity can steer them towards returns.
Following these board members or corporate officers can prove to be an effective strategy. They not only manage the companies, but they also have the full scoop on them down to the nitty gritty details. While there are a number of reasons a corporate insider will sell shares, there’s usually only one reason for a purchase: that person “in the know” sees potential gains in store.
Bearing this in mind, we used the Insiders’ Hot Stocks tool from TipRanks to zero-in on five compelling stocks snapped up by corporate insiders recently:
- Cardlytics, Inc. (NASDAQ:CDLX)
- NGM Biopharmaceuticals Inc. (NASDAQ:NGM)
- G-III Apparel Group, Ltd. (NASDAQ:GIII)
- Opko Health Inc. (NASDAQ:OPK)
- Accelerate Diagnostics, Inc. (NASDAQ:AXDX)
Here’s what we found out about what makes these stocks to buy.
The first on this list of stocks to buy is Cardlytics. The company wants to make marketing more relevant and measurable. They offer solutions that provide actionable insights and allow its clients to identify, reach and influence buyers at scale. Shares have already climbed 35% higher in the last month, and the company has one insider in its corner.
Clifford Sosin, founder and investment manager of CAS Investment Partners, recently disclosed that he bought over 112,000 shares in the last 19 days. The more than 10% owner of the company spent $3.8 million to boost his stake.
Wall Street focus has also locked in on CDLX. Writing for SunTrust Robinson, five-star analyst Youssef Squali acknowledges that the company has been impacted by both reduced ad budgets and lower consumer spending brought about by COVID-19. However, he argues it should be able to rebound more quickly because of its transaction/high ROI-based model.
“While visibility into timing of a turnaround remains poor (we estimate by year-end), we remain bullish on CDLX given its massive scale at 130 million-plus MAUs, performance-oriented model, differentiated channel and potential from new products/geos,” Squali commented.
It also doesn’t hurt that CDLX has an attractive valuation, with it trading at 4.1x EV/Revenue on Squali’s 2020 estimates. To this end, the analyst left a “buy” rating on the stock. However, he did cut the price target from $77 to $50, but this still implies modest upside potential of 13%.
Looking at the consensus breakdown, opinions are split evenly down the middle. Two “buys” versus two “holds” have been published in the last three months, making the consensus rating a “moderate buy.” At $53, the average price target is more aggressive than Squali’s and puts the upside potential at 19%. See the CDLX stock analysis.
NGM Biopharmaceuticals (NGM)
Next up for stocks to buy is NGM Biopharmaceuticals. Harnessing the power of human biology, NGM wants to change the way serious diseases are treated. Like Cardlytics, NGM has surged over the last month, 39% to be exact, scoring it some significant attention.
One such fan is Peter Svennilson, a director and more than 10% owner of the company. In the last ten days, he pulled the trigger on $1,683,400 worth of shares to increase his total holding.
Also singing NGM’s praises, Raymond James analyst Steven Seedhouse argues that the company has built a “sizable novel biologic pipeline.” His bullish thesis is partly related to its Aldafermin product, which was designed to treat non-alcoholic steatohepatitis, or NASH, with fibrosis.
While it will have to compete with Intercept Pharmaceuticals’ Ocaliva drug, the emerging leader in the NASH space with an AdCom scheduled for June 9, NGM’s therapy boasts better NASH resolution and no pruritus, according to a Phase 2b study. “Aldafermin may ultimately become the first therapy to achieve both FDA-recommended co-primary endpoints in NASH,” Seedhouse stated.
Highlighting another point of strength for NGM, its MK-3655 candidate, Seedhouse commented, “Given positive results on T2DM biomarkers and liver fat reduction in Phase 1b, MK-3655 looks like a promising candidate for F0/F1 NASH with diabetes.”
Based on everything the company has going for it, Seedhouse kicked off his coverage by publishing a “buy” rating and $31 price target. Should this target be met, shares could be in for a 100% twelve-month gain.
With 100% Street support, or five “buy” ratings to be exact, the message is clear: NGM is a “strong buy.” See the NGM stock analysis.
G-III Apparel Group (GIII)
Known for being a global leader in fashion, G-III Apparel manufactures clothing for some of the most well-known brands like Calvin Klein, Levi’s and DKNY. 2020 has seen this stock shed a significant portion of its value, but both the company’s CEO and one director made purchases, which could indicate a turnaround is on the horizon.
According to SEC filings, CEO Morris Goldfarb spent over $300,000 in two separate purchases to boost his position. Additionally, Director Thomas Brosig made a $50,000 purchase to acquire shares.
Turning to the analyst community, Needham’s Rick Patel believes GIII has what it takes to weather the COVID-19 storm. The analyst doesn’t dispute the fact that retail store closures don’t bode well for the company, but he argues that it is working to shift focus away from that particular segment.
Patel added, “We believe the company has the liquidity to endure a tough 1H – it ended 4Q with $197 million of cash (nearly 3x the level exiting CY18) and has $600 million of untapped revolving credit. We expect losses in 1H but 3Q is most critical (35% of sales, >55% of EBITDA annually) and a return to some level of normalcy should help recoup 1H losses and then some.”
In Patel’s opinion, the situation lends itself to a positive risk/reward profile, and as a result, he left a “buy” rating on the stock. However, he did give the price target a haircut, trimming it from $32 to $21. This still leaves room for shares to skyrocket 131% in the next year.
Looking at the consensus breakdown, two “buys” and three “holds” add up to a “moderate buy” analyst consensus. At $16, the average price target brings the upside potential to 76%. See the GIII stock analysis.
Opko Health (OPK)
Opko Health offers comprehensive diagnostics laboratories, a robust research and development pipeline, and unique pharmaceutical business solutions to meet the needs of patients throughout the world.
Recently released data from both its Phase 4 and Phase 2 clinical trials of Rayaldee, a treatment for secondary hyperparathyroidism and chronic kidney disease (CKD), gave investors reason to celebrate.
The Phase 4 trial results showed that at the given dose, the therapy could boost serum total 25-hydroxyvitamin D to the level required to effectively suppress elevated plasma intact parathyroid hormone (iPTH) in CKD patients. Adding to the good news, the drug was found to be safe. Looking at the Phase 2 results, the therapy was tolerable and its active ingredient could be activated even in patients with poor kidney function.
Following its release of the interim results, it’s safe to say the company has captured the Street’s attention. “While we are encouraged that OPKO’s BRL business is capturing incremental testing volumes associated with the COVID-19 outbreak, we view yesterday’s RAYALDEE news as much more crucial in terms of its potential to create enduring value for shareholders,” Barrington’s Michael Petusky stated. To this end, he left a “buy” rating and $4 price target on the stock, implying 102% upside potential.
Other analysts are on the same page. All three analysts covering the name rate it as a “buy,” and thus the consensus rating is a “strong buy.” Given the $4.33 average price target, shares could soar 119% in the next twelve months.
Not only this, but OPK’s management is also optimistic about its long-term growth prospects. In the last month, CEO and Chairman Phillip Frost has snapped up shares not once, not twice, but on eleven separate occasions. All in all, he shelled out over $3.6 million to acquire his new stake. See the OPK stock analysis.
Accelerate Diagnostics (AXDX)
The last on this list of stocks to buy is Accelerate Diagnostics. The company is developing innovative technology and diagnostic tests to accelerate lab results and drive better clinical outcomes for patients with serious infections.
Judging by the insider activity, now could be the ideal time to pick up shares. Director and more than 10% owner Jack Schuler bought shares eight times in the last month, with the largest of these purchases coming in at almost $1.2 million.
Weighing in on the stock for Piper Sandler, analyst William Quirk acknowledges that COVID-19 has taken a toll on AXDX. The company placed 13 net new instruments in the quarter, and this included several instruments that were removed from low-volume hospitals in EMEA in an effort to expand the consumables utilization in the region. In addition, AXDX had 197 live instruments in the U.S. at the end of 1Q20, up from 164 live instruments at the end of Q4 2019.
Commenting on this result, Quirk stated, “We acknowledge the number of instrument placements is disappointing; however, we believe management was on track prior to the shutdowns in early to mid-March. We are pleased with the number of go-lives that occurred despite COVID-19. All in, we continue to believe Accelerate can decrease the go-live time and increase consumables usage.”
In line with his optimistic take, Quirk kept his “overweight” rating and $16 price target as is. This conveys his confidence in AXDX’s ability to jump 70% higher in the next twelve months. See the AXDX stock analysis.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of over 5,000 Wall Street analysts. As of this writing, Maya Sasson did not hold a position in any of the aforementioned securities.