A simple yet effective way to screen stocks for investment ideas is to look at what the insiders are doing, and to keep an eye out for insider buying.
The insiders are the people in a company who have access to confidential information that could move the price of their company’s stock. They include people like the senior management and members of the board of directors.
Insiders need to publicly disclose every time they trade their stocks, so they can’t take advantage of people without access to that information.
For example, if an insider knows that news will come out that could cause the price of the stock to rise, they can go into the market and buy it from someone who doesn’t know about that news. If the news will drive the price of the stock lower, insiders could go into the market and sell their shares to some unfortunate and unsuspecting investors.
Insider buying can be a bullish signal for a stock. This is especially the case if it is preceded by a decline in share price. This is a sign that the insider thinks the selloff is an over reaction.
After all, insiders may sell for many reasons. But they only buy for one: to make money.
The following seven stocks have trended lower for various reasons. And the insiders are stepping up and buying.
- Seaport Global Acquisition Corp (NASDAQ:SGAM)
- Asana (NYSE:ASAN)
- General Electric Company (NYSE:GE)
- Tupperware Brands (NYSE:TUP)
- Broadwind Energy (NASDAQ:BWEN)
- Kinsale Capital Group (NASDAQ:KNSL)
- Immunic (NASDAQ:IMUX)
Stocks With Insider Buying: Seaport Global Acquisition Corp (SGAM)
Seaport Global Acquisition is a blank check company or special purpose acquisition company (SPAC). The company was founded in 2020 and is based in New York, New York.
SPACs are not like traditional companies, in that they have no commercial operations. They raise money for the sole purpose of investing in other companies. This means the company can take its investors’ money and do essentially whatever it wants.
Seaport just went public in early December. It hit the market around $10 a share. It made highs around $10.30 a share but has since dropped to current levels around $9.85.
Stephen Smith is the chief executive officer of the company. He must believe the share prices will rise from here, because he just made a significant personal investment of more than $50,000.
On March 12 he reported buying 5,314 shares at an average price of $9.91.
Asana is a work management platform. It provides software for individuals, teams, and executives.
As you can see on the above chart, ASAN was trading around $40 per share as recently as late February. But after a disappointing earnings report, shares went into steep decline. They reached $30 per share in early March.
Lorrie M. Norrington is a member of the board of directors of Asana. Norrington must believe the share price will rebound because he just made a significant personal investment. On March 12 she reported buying 6,200 shares at an average price of $32.12. This was an investment of about $200,000.
The Wall Street firms that follow and produce research on Asana also believe that shares are undervalued. The average target price is $37.18. That’s about 24% higher than where the shares are currently trading.
General Electric Company (GE)
General Electric operates as a high-tech industrial company worldwide. It was founded in 1878 and is now based in Boston, Massachusetts.
In the late 1990s, General Electric was a leading, innovative company. GE stock was the kind of investment some investors thought they should buy and hold forever.
But they say “pride comes before the fall,” and such was the case with GE. After a series of errors made by senior management, many analysts thought the company would go out of business.
After becoming extremely overbought, the sellers knocked GE down. You can see this on the chart. Paula Reynolds is a director. She must think GE will survive and prosper. On March 12 she engaged in insider buying, and purchased 5,000 shares at $12.50.
Not surprisingly, GE is well followed on Wall Street. The consensus rating is a buy and the average target price is $13.80. That’s about 14% higher than where the shares are currently trading.
Tupperware Brands (TUP)
Tupperware Brands Corporation was founded in 1946. It is based in Orlando, Florida. It operates as a consumer products company worldwide.
As you can see on the above chart, shares of TUP recently suffered a steep decline. This was the result of a disappointing earnings report. But, this selloff has triggered significant amounts of insider buying.
So far this month at least five insiders made significant purchases of the stock. They clearly believe that the selling was an overreaction and that the shares price will move back to higher levels. They include the chief executive officer, the chief financial officer, two executive vice presidents, and a divisional president.
These five insiders purchased a total of 47,487 with an aggregate investment total of $1,179,359. This was an average price of $24.83.
D.A. Davidson is the only research firm that follows Tupperware. This boutique investment bank has a buy rating on the stock.
Broadwind Energy, Inc. (BWEN)
Broadwind builds and sells structures, equipment, and components for clean tech and other specialized applications. Its customers are primarily in the United States, and it operates through three segments: industrial solutions, heavy fabrications, and gearing.
As you can see on the above chart, since early February the share price has lost about half of its value.
Hayes Kennedy is an officer of the company. He has decided to use the weakness in the stock as an opportunity to add to his position. On March 15 he paid an average price of $6.10 a share for a total of 4,000 shares. This was an investment of almost $25,000.
At least three analysts follow Broadwind, and they each think it is extremely undervalued. At an average target price of $12, they believe that it will more than double from here.
Kinsale Capital Group (KNSL)
Kinsale Capital Group is a specialty insurance company that provides property and casualty insurance products. Its customers are primarily located in the United States. The company was founded in 2009 and is based in Richmond, Virginia.
As you can see on the above chart, since late December shares of Kinsale have declined from around $240 a share to current levels around $167. This is a loss of around 30%.
Steven Bensinger is a director of the company. He must believe that there are better times ahead for the stock. On March 10 he made a significant personal investment of about $606,000. He reported buying 3,500 shares at an average price of $173.03.
At least six analysts follow Kinsale, and they all believe that it is undervalued. The consensus rating is a strong buy and the average target price is $233.75 a share. That’s about 40% higher than the current share price.
Immunic is a clinical-stage biopharmaceutical company that develops oral immunology therapies for the treatment of chronic inflammatory and autoimmune diseases. Its headquarters are in New York City.
As you can see on the above chart, IMUX got caught up in the day trading frenzy and spiked higher. But they have since backed off.
Andreas Muehler is the chief medical officer of the company. He must think that the shares will rebound. He decided to take advantage of the weakness and engage in some insider buying. On March 2, Muehler reported buying 10,006 shares at an average price of $15.54 per share. This is more than $155,000 worth of stock.
Out of four analysts following Immunic, they all believe that the stock is significantly undervalued. The average target price is $58.50. That’s 290% higher than where the shares are currently trading.
At the time of this publication, Mark Putrino did not have any positions (either directly or indirectly) in any of the aforementioned securities.